From the name itself, a high deductible health plan (HDHP) is a form of health insurance plan that has a low monthly premium with a high deductible. When we say monthly premiums, these are charges you have to pay to your insurer on a monthly basis. On the other hand, a deductible is the amount of money from your pocket you have to provide before your insurer can pay a claim. When your deductibles are fully paid, that’s when your coverage kicks in.
In terms of premiums, high deductible health plans are relatively affordable. However, you would be needing at least around $1000 in order to cover for your deductibles so that’s the catch. If you want to know if an HDHP is what you need, read on further.
How Does It Work?
Just in case you need to calculate some numbers, deductibles have a minimum of $1,350 for an individual and $2,700 for a family. And if there’s a minimum, there is also a maximum. For an individual, deductibles and other out of pocket expenses are limited to only until $6,650 and $13,300 for a family.
If ever you would like to offset the expenses of an HDHP, try applying for a health savings account (HSA). This is a type of medical savings account that is only accessible by those enrolled in HDHP. One perk of opening an HSA is it offers a tax-free or tax-reduced way to help you save for healthcare costs. Take note that there are yearly contribution limits but you are allowed to carry over your balance year to year. You also have the option to contribute to an HSA pre-tax.
It’s better if you are able to deposit the an amount same to your deductible each year to your HSA for you to maintain funds to cover medical expenses.
Benefits of Getting A High Deductible Insurance Plan
The most apparent and main advantage of getting a high deductible health plan is are the relatively affordable monthly premiums. This may be the one of the most practical health insurance plan for you if you are fairly healthy, not required for regular doctor visits, or don’t have a large family.
However, there are some cases among employers where HDHPs are the only type of insurance plans they provide. So if you require different needs, it’s important to take note of this.
If you have an ample amount of liquid savings, considering an HDHP can be good for you, too. The reason for this is for covering your high deductibles, maintaining religious payment for monthly premiums, and other out-of-pocket expenses. You would need to shell money out for those.
Also keep in mind to avoid as much as possible hybrid plans. These are insurance plans that have high deductibles and copayments after meeting your deductibles. Copayments are also out-of- pocket expenses, usually in fixed amounts, for availing certain services such as doctor visits or hospital visits.
Drawbacks of Getting A High Deductible Insurance Plan
Unless you’re okay with shelling out some money from your pocket before meeting your deductible, this can be a major drawback for you if you plan to get an HDHP. Some of these payments will include prescription drugs, doctor visits, emergency room visits, surgeries, and outpatient procedures. And you have to pay them fully until you’ve met your deductible. As mentioned earlier, the deductible limits for an individual starts at $1350 to $6,650 and $6,650 to $13,300. If you’re comfortable with that amount of expenses in exchange for health security, then paying from out of your pocket should not be a problem. You should keep in mind that deductibles for an HDHP is generally higher than traditional health insurance plans. Thinking of having kids in the future? If you already have a high deductible health plan, you should check their offers for a maternity coverage.
When Should You Get an HDHP?
High Deductible Health Plans are most practical for those who are fairly healthy and those who do not need regular visits to the doctor. That and if you have liquidity for covering your deductibles and monthly premiums, HDHPs are perfect for you if you want that extra health security. You are able to cut back on expenses due to the tax-advantaged nature of your HSA, your savings account that are only available for HDHP enrollees.
If you are healthy, you’re probably thinking, “Why should I waste my money on health insurance?”. Because getting an affordable health insurance is better than going without any at all. It’s nice to have that sort of safety net. Besides, if a healthy person has low chances of needing urgent medical treatment, then you wouldn’t need to worry about high deductibles that much.
Should You Get HDHP At All? Or Choose Traditional Health Insurance Instead?
In some cases, employers can give you the option between choosing a traditional health insurance plan or a high deductible health plan. Should your employer be the one taking care of premium costs, then traditional plans may be better in terms of budgeting.
Apart from that, traditional health plans have lower deductibles. It’s a good idea if you compare your estimated out-of-pocket expenses for both policies and see from there which would give you the more affordable option.
If you are self-employed and healthy, you may want to consider an HDHP because of the lower premiums compared to traditional ones.
It’s always important to keep in mind to consider health insurance as a priority in your budgeting. You should never leave it out. It’s a given that taking care of your health is of utmost importance. If you are on a tight budget, make it a habit to as much as possible cut a bit of expenses on leisure and luxury. This is especially important if you’re not financially depending on anyone. Investing on your health is the wisest decision an adult can ever make. Having a safety net for your health will give you peace of mind should a health emergency arise.