High-deductible health plans usually carry lower premiums but require more out-of-pocket spending before insurance starts paying for care. Meanwhile, health insurance plans with lower deductibles offer more predictable costs and often more generous coverage, but they usually come with higher premiums. Show
What is a high-deductible health plan?Compared to a traditional low-deductible health plan, a high-deductible health plan, or HDHP, requires you to pay a higher amount for medical care out of pocket before your insurance starts covering eligible costs. The amount you pay out of pocket is called the deductible. According to the IRS, an HDHP is defined as the following in 2022:
HDHPs may cover some preventive care benefits at no or minimal cost. This could include the following:
HDHPs were intended to encourage consumers to shop around for health care. The logic is that if you’re responsible for medical costs upfront, you’ll do more work to find lower-cost providers — cutting expenses for you and your insurer. In practice, this hasn’t panned out for most people. People with HDHPs aren’t shopping around for health care or talking with providers about costs, according to research from the University of Michigan Institute for Healthcare Policy and Innovation. And although consumers with HDHPs tend to reduce costs, they do so by skipping out on care and medication. High-deductible health plans and HSAsOne of the perks of having an HDHP is that you may be eligible to save funds in a health savings account, or HSA. They are tax-advantaged, meaning you can direct funds from your paycheck pretax into an HSA, or you can add the money post-tax and deduct taxes later. In 2022, the annual HSA contribution limit for an individual is $3,650. Someone with family coverage can contribute up to $7,300. An employer may also contribute to your HSA. HSA money can earn interest, can be invested in stocks or mutual funds and can be spent (tax-free) on any qualifying medical expenses, as defined by the IRS. You can contribute to one as long as you have an active qualifying HDHP and no other health coverage. HSA money also rolls over year to year, so you can use it when you need it. 🤓Nerdy Tip Not all HDHPs qualify you for an HSA, so make sure the one you choose meets IRS requirements. Pros and cons of a high-deductible health planThere are several reasons you might decide for or against this kind of health plan. Pros:
Cons:
Is a high-deductible health plan right for you?While an HDHP can be a great option for some health care consumers, it’s not the best choice for everyone. A high-deductible health plan might be right for you if:
A low- or no-deductible health plan might be right for you if:
Doing the math on HDHPsWhile it can seem like a straightforward choice based on how often you’re using the health care system, it’s worth doing some side-by-side comparisons. Even with a chronic condition, a high-deductible plan with a low monthly premium and a generous employer HSA contribution might end up being cheaper than a traditional plan with a higher monthly premium and no employer contribution. Costs to compare from plan to plan include:
Your decision will be highly individual, a financial choice based on you and your family’s health care needs. Choose the plan that allows you the best options for getting the medical care you need, when you need it. What is considered a high deductible health plan?For 2022, the IRS defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. An HDHP's total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can't be more than $7,050 for an individual or $14,100 for a family.
Why would I want a high deductible health plan?Lower monthly premiums: Most high-deductible health plans come with lower monthly premiums. If you anticipate only needing preventive care, which is covered at 100% under most plans when you stay in-network, then the lower premiums that often come with an HDHP may help you save money in the long run.
Is it better to have a high deductible or high premium?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. The lower a plan's deductible, the higher the premium.
Is it good to have a high deductible insurance?High-deductible health plans usually carry lower premiums but require more out-of-pocket spending before insurance starts paying for care. Meanwhile, health insurance plans with lower deductibles offer more predictable costs and often more generous coverage, but they usually come with higher premiums.
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