Understanding how a high deductible health insurance plan works can help you find the right coverage.
What is a high deductible health plan?
A high deductible health plan (HDHP) is any health plan that generally has a lower monthly premium and a higher deductible than traditional plans. Here are some important details that can help you decide if a high-deductible plan is right for you.
How does a high deductible health plan work?
Generally, your health plan begins paying for eligible medical expenses after you’ve met your deductible, which means you’ve met the plan’s maximum deductible amount. This applies to high-deductible health plans as well as traditional plans. The amount of your deductible depends on the plan you choose. If you choose a plan with a higher deductible, you may have a higher out-of-pocket to meet your deductible. A high deductible health plan has pros and cons.
Advantages and Disadvantages of a High Deductible Health Plan
Advantages
Lower monthly premiums: Most high-deductible health plans include lower monthly premiums. If you think you’ll only need preventive care, covered at 100% in most plans when you stay in-network, the lower premiums that come with an HDHP can help you save money in the long run.*
Tax-free spending account: Some qualified high-deductible health plans may be equated with a Health Savings Account (HSA). You can use HSA funds to help pay for eligible medical expenses. Money put into an HSA is tax-free, which can also help you save money.
Disadvantages
Higher deductible: If your deductible is higher, it means you’ll have to pay for your health care out of pocket up to the amount before the health plan starts helping you pay for covered costs. The exception is for preventive care, which is covered at 100% in most health plans when you stay in the network.
Expensive out-of-pocket medical expenses: If you choose a health plan with a high deductible and need non-preventive medical care or expensive medical care, you must pay the full deductible before your plan begins to help you pay for covered costs. Depending on your medical needs, these costs may be significant out-of-pocket expenses that you may not have considered.
When choosing between a high-deductible and a more traditional health plan, consider your anticipated health needs. Are you likely to require medical care beyond preventive care? If so, an HDHP plan with a lower monthly premium isn’t necessarily an advantage; a more traditional plan with a higher premium and lower deductible may offer better cost savings.
How to choose an insurance plan that’s right for you
Consider the following when choosing a health plan:
If your health is good and you usually visit the doctor once a year, a lower monthly premium may be a good option for you.
If a chronic health condition means frequent visits to your primary care provider (PCP) or specialists during the plan year, you need to decide if the savings from lower premiums are better than the cost of regular care or drugs.
Carefully evaluating the pros and cons of high deductible health insurance can help you find the coverage that’s right for you. Finding the plan that’s right for you will not only help you save money but also help ensure you get the health care coverage you need when you need it.
