What You Need to Know About High Deductible Health Plan
Are you concerned about paying high monthly insurance premiums, but don’t want to be left uninsured? You may consider a high deductible health plan (HDHP) as one of your options. But first, what is an HDHP?
An HDHP is ideal for those willing to pay more out of pocket first before their insurance kicks in. It is an insurance plan with a deductible of at least $1,400 for individuals and $2,800 for families, at least for 2020. It also comes with a maximum out-of-pocket cost, which is $6,900 for individuals and $13,800 for families. These figures are bound to increase to $7,000 and $14,000 in 2021.
HDHP vs. Traditional Health Plan
What is an HDHP and how different it is from a regular health plan?
There are indeed some key differences between the two. HDHP comes with lower premiums, while regular plans charge higher premiums regardless of whether you use the insurance or not.
HDHPs, as discussed above, have a minimum deductible, which is higher than the deductible in regular plans. The same goes for the out-of-pocket limit, which is higher in HDHPs.
One of the advantages of choosing an HDHP is that it makes you eligible to set aside money in a Health Saving Account (HSA). You can then use that money to pay for your out-of-pocket costs. Some employers even offer to match your HSA contributions.
Busting Misconceptions About the HDHP
If you’re new to the idea of this health plan, you might have more questions than just “what is an HDHP?” You might also have concerns now about its cost, how it works, your eligibility, etc. These are things that will be addressed in this section. Before those fears shut the opportunity down for you to explore a health plan that might be beneficial for your situation, here are the truths behind those concerns:
HDHPs cost too much
- Savings on premiums. This is not necessarily true because the lower monthly premiums will offset your higher deductible. If you or your family members are generally healthy and don’t get to use your insurance as much, you can save more money with HDHPs.
- HSA savings. Whatever you save from your premiums, you can set aside in your HSA. Even if you need money for medical expenses, you can still dip your hand into your HSA savings.
- Free preventive care. With HDHPs, you can take advantage of getting preventive care, consisting of vaccinations, well-child visits, physical, or mammograms completely free.
- Tax breaks. Other savings come from the tax breaks from having an HSA because the contributions are made before taxes, all the earnings and the medical payments are tax-free.
- HSA match. If you have a generous employer who’s willing to match your HSA contributions, that’s too big of an opportunity to pass up, so an HDHP would be a cost-effective health plan for you.
HDHPs don’t offer enough coverage
- HSAs for life. Whatever you save in your HSA can cover out-of-pocket medical costs now and in the future, even after you’ve retired.
- Major medical costs and preventive care are still covered. You can use your HDHP for significant medical expenses and enjoy 100% free preventive care. It’s just that you have to pay a higher deductible amount on your own before your insurance benefits kick in.
HDHPs are too confusing to grasp
- Straightforward concept. HDHPs work almost like other traditional health plans, except they have a higher deductible. The lower premiums make up for the OOP expenses anyway.
- Available resources. You can see more of the differences between HDHPs and traditional plans using various resources you can find online and the HSA guides.
- Learning with time. The longer you stick to this plan, the more you’ll learn about it over time. You can also learn from the different situations that you might get in involving the use of HDHPs.
Despite these benefits, you might not want to get an HDHP, though, if you’re suffering from a chronic medical condition that requires a lot of doctor’s visits.
HDHPs can prove to be an excellent choice in insurance plans if you are generally healthy, and live with a small family of healthy people. These are also great if you do not have a known existing medical condition, so you do not worry about fixed medical bills throughout the year, and have some liquid savings, which the HSA savings can augment later.
Now that you’ve gotten some answers to “what is an HDHP,” learn more about its cost-saving features and take advantage of each one. This might just be the type of health plan for you and your family.