Why A High Deductible Health Plan is the Way to Go - MotivHealth Insurance Company (2024)

FAQs

Why A High Deductible Health Plan is the Way to Go - MotivHealth Insurance Company? ›

With an HSA-based plan, you often pay a lower premium in return for having a higher deductible. The key difference is that an HSA-based plan has two parts: Insurance coverage PLUS a health savings account.

Higher deductibles usually mean lower premiums for small businesses trying to find ways to cut costs and save.

Because the deductibles are high, monthly premiums are lower than similar health insurance plans that have a lower deductible. If you're generally healthy and don't have medical expenses beyond annual physicals and preventive screenings, an HDHP could save you several hundred dollars or more a year.

A plan with a higher deductible than a traditional insurance plan. The monthly premium is usually lower, but you pay more health care costs yourself before the insurance company starts to pay its share (also called your deductible).

In general, people who know that they are going to need moderate medical treatment in the coming year might be better served by a traditional plan with a lower deductible and copays — even though the premiums will likely be higher than they'd be for an HDHP.

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.

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.

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.

In general, HDHPs are better suited for people who are young, single, healthy, or wealthy. PPO plans tend to be better options for people who are older, have a family, or have chronic medical conditions.

Policies with lower deductibles typically have higher premiums, meaning you'll pay more each month for your insurance coverage. However, if you have a higher deductible, you may be able to save money on your premiums but may be responsible for paying more out of pocket if you need to file a claim.

Why people who are in good health might prefer to have a high deductible insurance plan with a health savings account? ›

The health savings account (HSA) helps people with high-deductible health insurance plans cover out-of-pocket medical costs. Contributions to HSAs aren't subject to federal income tax, and the earnings in the account grow tax-free.

The economic principle behind HDHPs is 'cost–sharing', a "method of financing health care that require some direct payments for services by patients." Increasing deductibles is one perceived way to cut health care costs by decreasing its overall usage.

In case of using deductibles, since the insured people are obliged to participate fully in paying their costs until they reach the deductibles amounts, more carefully and accurately they will use health care services, and potentially many unnecessary costs will be avoided.

Lower Monthly Premiums

The premise is simple: As the insurance company takes on less risk, they can offer lower monthly payments. This makes high-deductible health plans the perfect choice for people who are generally healthy and don't require much medical attention.

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.

Diverse Financial Situations

With potential high costs, Spangher said changing to offering only an HDHP can also lead to employees delaying or avoiding medical care, which could make medical costs more expensive down the line.

HSAs also have significant tax advantages for the employers who offer them. Employers don't have to pay federal income tax, social security, or medicare taxes (commonly known as FICA taxes) on any pre-tax contributions (from the employer or the employee).

Deductible values vary based on the coverage, insurer, and how much you pay in premiums. The general rule is that if your policy comes with a high deductible, you'll pay lower premiums every month or year because you're responsible for more costs before coverage starts.

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.

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.