If it’s open enrollment season, you’re probably drowning in terms like high-deductible health, low-deductible, HSA, premiums, networks, providers, and on and on. If you tend to skip the fine print, check off the cheapest box and move on, it might be time to slow down and consider your options. A high deductible health insurance plan is usually the cheapest option available, but it may not always work out the way you had hoped.
High Deductible Health Plans (HDHP) are plans with lower monthly costs and higher deductibles. This saves you money on a monthly basis which is always nice for that monthly budget. When it’s time to go to the hospital though, you can expect a much larger bill. That is, if you haven’t met your deductible yet. If you have, the plan works just like any other plan, covering a portion of your expenses. Good news though is that most preventative care is covered 100%, even on an HDHP.
What’s an HSA?
Most HDHPs come with a Health Savings Account (HSA). HSA’s are built-in savings fund to help offset the cost of future medical bills. They take funds from your paycheck pre-tax, so that reduces how much Uncle Sam takes each paycheck. Some employers may also contribute to your HSA, giving you some free money to put towards medical expenses. Your HSA may also earn interest and even be used as a retirement account. Only kicker is that you can only use it to pay for qualifying medical expenses, like that hospital bill.
How High is the Deductible?
Most HDHPs deductibles range between $1500 to $5000 for an individual.
Who Should Consider an HDHP?
A high-deductible health plan is not for everyone. If you’re unprepared, you can find yourself in a mountain of medical bills, even though you technically have medical insurance coverage. However, if you’re a healthy young adult who rarely gets sick, you have the means to contribute regularly to your HSA and you can afford to pay the deductible if you have to, then a HDHP could be a good option for you and your family. You still have access to all the preventative care you need without paying more for insurance you probably won’t use.
Who Should NOT Consider an HDHP?
Low deductible health plans make future medical expenses easier to predict, so for many families, this is important. If you don’t have an adequate savings account to pay several thousand dollars for a deductible in case of emergency, don’t risk it with an HDHP. Additionally, those who see the doctor frequently, have chronic conditions, are pregnant or may become pregnant, take prescription medication, or have young children who play sports or are high-injury risk, an HDHP is probably not the best option.
If you’re having trouble paying your insurance premiums, it’s better to have some insurance than no insurance, so an HDHP might be a valid option. However, make your decision based on your individual situation and your health care needs to take care of both your family and your bank account.