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What is an HDHP and how does it work?True to its name, a high-deductible health plan is a health insurance plan with a high deductible. What’s a deductible? It’s the amount you’ll pay out of pocket for covered medical expenses before your insurance pays anything. With HDHPs that can help make you eligible for the tax advantages of a health savings account, your deductible for 2021 and 2022 will be at least $1,400 for individuals and $2,800 for a family, according to IRS requirements. Once you have covered expenses that reach that annual deductible, your insurance starts paying for care. Keep in mind that after reaching your deductible, you will probably have a copay (a flat fee for visiting a provider or filling a prescription) or coinsurance (a percentage of medical costs you pay) amount that you owe for most covered services for the rest of the year. Though
HDHPs usually have higher deductibles than most PPOs or HMOs, they do come with an out-of-pocket maximum. This is the most you’ll pay in a year for covered services from in-network providers. For 2021, the maximum is $7,000 for a single person and
$14,000 for a family — rising to $7,050 and $14,100 in 2022. Once you have covered expenses that reach this maximum, your plan will pay 100% of your expenses for in-network care for the rest of the year. Many HDHPs do provide 100% coverage for preventive services in your network before you meet your deductible. These include procedures such as yearly physicals, vaccinations, colonoscopies, mammograms, and flu shots Advantages of an HDHPHDHPs are popular because they often have low monthly premiums, which is what you pay every month for your plan. 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. Another benefit of having an HDHP is that it can help make you eligible to contribute to a health savings account (HSA) . A health savings account is only an option for those who have an HSA-qualified HDHP — so if you want one, make sure your plan is eligible. Additional HSA eligibility rules are described in IRS Publication 969. HSAs allow you to put pre-tax earnings into an account you can tap into to pay qualified medical expenses, such as doctor visits, prescription drugs, and other medical services and supplies. You save on taxes since the money you put in and take out is either tax free or tax deductible. Because contributions to an HSA roll over year to year, you don’t lose the money if you don’t spend it right away.
Pros
Disadvantages of an HDHPThe main drawback to choosing an HDHP is having potentially high out-of-pocket expenses when you receive covered services during the year. You pay more in upfront costs (your deductible and copays and/or coinsurance) for nonpreventive care until you meet your yearly out-of-pocket maximum. For example, let’s say a routine doctor visit that’s covered by your HDHP leads to a diagnosis of a medical condition that needs expensive treatment. You’ll be responsible for the cost of that care up to your deductible, plus copay and/or coinsurance fees up to your out-of-pocket maximum. So, if you have a chronic condition and need to visit doctors often, an HDHP may not be the best option for you. Another possible downside to HDHPs is that you may find yourself putting off doctor visits because you’re not used to having such high out-of-pocket costs when you use covered services. A 2019 survey found that about half of U.S. adults
say they or a family member put off or skipped some sort of health care or dental care in the past year because of the cost.1 Avoiding doctor visits and prescriptions could lead to more serious health problems and larger medical bills down the road. Cons
When an HDHP might make senseA high-deductible health plan can make sense for you if:
When an HDHP might not make senseA plan with a lower deductible, such as a PPO or HMO that isn’t designed as an HDHP, might be a better choice than an HDHP if:
If an HDHP is right for youOnce you carefully weigh the pros and cons of a high-deductible health plan and decide it’s worthwhile, it’s time to shop around. Compare coverage options of HDHPs available in your area, including premiums, out-of-pocket costs, and provider networks to figure out which would work best for you. If your employer doesn’t offer an HDHP option, or you don’t have coverage through an employer, you can shop for an HDHP plan on the health insurance exchange at HealthCare.gov. Many state-run exchanges also have options for HDHPs. The bottom lineThere’s a lot to consider when choosing health insurance , especially when it comes to high-deductible health plans. Whether an HDHP can save you money depends on the specific plans available to you and your expected medical expenses for the year. While HDHPs often have lower monthly premiums, your personal financial and health situation should determine the type of coverage that’s best for you and your family. Learn more about affordable health insuranceLearn more about Kaiser PermanenteShop our plans What is the benefit of a high deductible health plan?HDHPs are thought to lower overall health care costs by making individuals more conscious of medical expenses. The higher deductible also lowers insurance premiums, leading to more affordable monthly costs. This arrangement benefits healthy people who need coverage for serious health emergencies.
What are the pros and cons of having a higher deductible?High Deductible Health Plans: Pros and Cons. Premiums are typically lower than with POS or PPO plans.. Networks are not necessarily narrowed, as with HMOs.. People who rarely use their health benefits may save money.. If you are not on expensive medications, your monthly bills may be lower.. What is the main downside of high deductible health insurance plans?The cons of high-deductible health plans
Yes, HDHPs keep your monthly payments low. But they can also put you at risk of facing large medical bills that you may not be able to afford. Since HDHPs generally only cover preventive care, an accident or emergency could result in very high out-of-pocket costs.
Why would you want a higher deductible?A deductible is the amount you pay for health care services each year before your health insurance begins to pay. In most cases, the higher a plan's deductible, the lower the premium. When you're willing to pay more up front when you need care, you save on what you pay each month.
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What are the benefits of a high deductible health plan
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