What is a High-Deductible Health Plan?
A high-deductible health plan (HDHP) is what you might expect from its name. It has a higher deductible than some traditional health insurance plans but lower monthly premiums. This can help balance out your costs.
How Does a High-Deductible Health Plan Work?
If you are considering one of these plans, it is important to know that while they typically have a lower monthly premium, you must meet your deductible before any copays or coinsurance kick in. This includes pharmacy costs.
Like a traditional health insurance plan, some preventive services are paid in full and don’t apply to your deductible. For example:
- Annual physicals
- Immunizations
- Mammograms
- Screenings for blood pressure, cancer, depression, cholesterol, and HIV
| How an HDHP works | Percentage you pay | Percentage your HDHP pays |
|---|---|---|
| Step 1: You are responsible for paying for all your medical expenses until you meet your deductible. Your deductible is the amount you owe for covered health care services before your health plan begins to pay. The deductible may not apply to all services. | 100% | 0% |
| Step 2: Cost sharing and copays kick in after you meet your deductible. You will pay a smaller percentage of your health care costs; your HDHP will pay the rest. Your share is called coinsurance. |
20% | 80% |
| Step 3: Once you meet your out-of-pocket maximum, your HDHP will completely pay for the covered health care services that you receive. Your out-of-pocket maximum includes your deductible, copay, and coinsurance. | 0% | 100% |
HDHP and HSAs
If you are enrolled in an HDHP, you might be eligible for a health savings account (HSA). An HSA can provide tax advantages because it allows you to set aside pretax money to use toward eligible medical expenses. It is important to know that not every plan with a large deductible qualifies you for an HSA. To qualify as an HDHP, the plan must meet the IRS requirements for minimum/maximum deductible and out-of-pocket costs.
High-Deductible Health Insurance Benefits
Enrolling in an HDHP is a choice you should carefully consider. Be sure to take all aspects of your situation into account so you can weigh the benefits of this plan against the limits that they have.
Lower medical expenses
An HDHP can help lower the cost of your medical coverage, depending on your situation. For example, if you are usually healthy and don’t see a health care provider very often or use your benefits, you may spend less on what you pay each month for your insurance.
Lower monthly premiums
HDHPs often have lower monthly premiums than traditional health insurance plans, which can be helpful when you need to stay within a budget but still want access high-quality for less.
Save on health expenses through an HSA.
If you are enrolled in an HDHP that is HSA-eligible, you could save on health care expenses. This pairing allows you to save pretax money that you can use for qualified medical expenses. These expenses can include out-of-pocket costs such as deductibles, coinsurance, prescriptions, dental care, and eyewear.
Considerations of High-Deductible Health Plan
Enrolling in any health insurance plan, including an HDHP, is a big decision. Before you choose to enroll in an HDHP, remember to:
- Consider all the costs of an HDHP, especially deductibles. You will have responsibility to pay for all medical services and prescriptions until you meet your deductible.
- Plan for any upfront expenses involved in care that you may need so you don’t risk having to delay routine health care or skip going to an emergency room. Having an HSA paired with your HDHP can help you pay for these costs.
As with other plans, many preventive services, like your annual well visit with your PCP, are covered at 100%, with no impact to your deductible.
Higher deductibles
Having a higher deductible with an HDHP means that you are responsible for many upfront, out-of-pocket costs until you meet your deductible. These expenses can include everything from the services you receive when you visit a health care provider or fill a prescription to having bloodwork or other diagnostic tests done.
Medical emergency costs
Even people who are healthy can have unexpected medical costs, including an emergency room visit. If you enroll in an HDHP, you should plan to be prepared to pay for these expenses upfront—which could be your full deductible.
Putting off care
If you have an HDHP, having to pay for medical services upfront can make you think that it is OK to delay the care that you need. Remember that having an HSA paired with your HDHP can help you pay for these costs.