What health insurance you choose comes down to a few factors: Your overall health, financial stability, and what is/what isn’t offered by your employer. Something you might want to consider is a high-deductible health plan (HDHP). Here’s a quick look at HDHPs.
The Basics of a High-Deductible Health Plan
With an HDHP, you typically pay lower premiums than a low deductible plan. An HDHP also requires you to pay more out of pocket before your health insurance kicks in.
The Pros
The benefits of a high deductible health plan are:
Low Monthly Premiums. HDHP premiums typically cost less per month than low-deductible health plans.
Health Savings Account. When you have an HDHP, you also qualify for a Health Savings Account (HSA). HSAs are great because contributions and withdrawals are tax-free when used for qualified medical expenses. You can also invest HSA funds for additional tax-free growth.
Employer HSA Contributions. According to one report, more than 50 percent of employers offer contributions to employees’ HSAs.
The Cons
The downsides of a high deductible health plan are:
Expensive. The upfront costs can be costly.
High Payments. With a high-deductible health plan, your out-of-pocket costs may be higher. If something unexpected happens you must be financially prepared to cover the high deductible.
Avoiding Care. Those high payments for medical care might keep you away from checkups and other preventative measures.
Do One Thing: Consider your overall health and financial ability to handle a large deductible before signing on for an HDHP.
FAQs
A high-deductible health plan can make sense for you if: You're healthy and rarely get sick or injured. You have no existing medical conditions. You can afford to pay the high deductible out of your pocket if an unexpected medical expense arises.
What is one disadvantage to a high-deductible health plan? ›
It Is More Expensive to Manage a Chronic Illness With an HDHP. A chronic illness, such as heart disease or diabetes, can be much more expensive to manage under an HDHP than a traditional health care plan. With these conditions, regular medications and health screenings may be required.
What is the disadvantage of having a higher deductible car insurance? ›
Higher Out-of-Pocket Costs: A major drawback of high deductibles is the significant out-of-pocket expenses you'll have to pay before insurance covers the rest of a claim. This can be challenging for some individuals during emergencies.
Why do companies push high deductible health plans? ›
Higher deductibles usually mean lower premiums for small businesses trying to find ways to cut costs and save.
Who should avoid a high-deductible health plan? ›
Namely, you're responsible for paying a larger portion of your healthcare expenses out of pocket. This can be a significant financial burden for those with a lot of medical expenses and could lead to financial strain. HDHPs may not be the best choice for those with chronic or frequent medical needs.
Is it better to have HDHP or PPO? ›
If you have few needs, go with the HDHP. However, if you visit a doctor's office regularly, see specialists, and take several medications, a PPO without a high-deductible might be the better choice.
What is the point of health insurance if the deductible is so high? ›
But why would a plan with a high deductible be a good choice? If you're enrolled in a plan with a higher deductible, preventive care services (like annual checkups and screenings) are typically covered without you having to pay the deductible first. And a higher deductible also means you pay lower monthly premiums.
What is the upside of having a high deductible? ›
The upside to having a high deductible in an insurance policy is that it usually corresponds with lower insurance premiums. Since a deductible is an out-of-pocket expense that a policyholder must pay before an insurance company covers the remaining costs, choosing a higher deductible can discourage moral hazard.
Who benefits from an HDHP? ›
An HDHP is best for younger, healthier people who don't expect to need health care coverage except in the face of a serious health emergency. Wealthy individuals and families who can afford to pay the high deductible out of pocket and want the benefits of an HSA may benefit from HDHPs.
Does a higher deductible make insurance cheaper? ›
The higher a deductible, the lower the annual, biannual or monthly insurance premiums may be because the consumer is assuming a portion of the total cost of a claim.
If you're more likely to get into an accident, you won't want to pay out a higher deductible. However, if you're generally a safer driver, your car insurance premiums will be lower with a $1,000 deductible.
Why is it critical to always have auto insurance? ›
Having car insurance is required by law in most states. If you are at fault in a car accident, the auto liability coverage required on your car insurance policy helps pay for covered losses, such as the other party's medical bills and damage to their vehicle or other property that results from the accident.
What is a downside of a HDHP? ›
Higher deductible: If your deductible is higher it means you are required to pay for your medical care out of pocket up to that amount before your health plan begins to help pay for covered costs. The exception is for preventive care, which is covered at 100% under most health plans when you stay in-network.
Why would someone want a high deductible but a lower premium? ›
The size of your monthly premium impacts your deductible—typically, the lower the premium, the higher the deductible. Why does having a higher deductible lower your insurance premiums? Because you'd be taking on more costs if you actually need care, rather than paying more each month toward potential care.
What if my employer doesn't offer HDHP? ›
Under health insurance, the HDHP should be clearly marked. If you don't see an HDHP as an option, ask your HR Department if there is one available. If your employer has decided against offering an HDHP, you can opt out of buying employer-sponsored health insurance and purchase a private plan on Healthcare.gov.
Is it better to have a higher deductible or out-of-pocket maximum? ›
A health insurance deductible is more likely to play a role in your healthcare costs than an out-of-pocket maximum unless you need many healthcare services in a year. An out-of-pocket maximum is a safety net to save you from paying endless healthcare bills.
Is a high deductible plan good for taxes? ›
Tax benefits are three-fold: your additional voluntary contributions are pre-tax or tax-deductible*, interest earned is tax-free, and HSA distributions are tax-free if they are used to pay for qualified medical expenses. * Contributions are tax-deductible on your Federal tax return.
