High Deductible Health Insurance
There is one health care option that has been steadily growing in popularity – the high deductible health insurance plan or HDHP. An HDHP works like a standard insurance plan but it has a very high deductible, so high most people will not satisfy it in a typical year. In return the premium on the plan is much lower. These plans are sometimes referred to as “catastrophic health insurance”. However that term implies the insurance only covers some major medical catastrophe, which is not the case.
What Are the Advantages?
With the passage of the Patient Protection and Affordable Care Act, aka Obamacare, all health plans must provide free preventive health care services, even high deductible plans. Routine, preventive services like checkups, well baby visits and immunizations are covered 100%. That’s far from catastrophic coverage.
Other health care services that you use will have to be paid for out of pocket until the deductible is met. However the hospital or doctor will first send the bill to your insurance company. Your insurance company will then negotiate the prices of services on your behalf. This results in drastically lower rates then you would pay if you had no insurance coverage at all. The then doctor sends you a revised bill with the newly negotiated insurance rate which can be less then half of the original bill. Even if you don’t satisfy the deductible, these savings can greatly reduce your out of pocket cost.
While those are benefits, the major advantage of an HDHP are the smaller premiums charged. In exchange for a higher deductible, health insurance providers will lower the premiums they charge you compared to low deductible plans. Young, healthy individuals can often get plans for less then $50 a month. Family plans can be much more manageable as well. The savings from the lower premiums should be set aside in case you do have health care costs you need to pay.
If you are wise, you will pair your high deductible health plan with a health savings account. An HSA allows you to pay for your medical care with pre-tax dollars. In other words, you do not pay income tax on the amount of money you spend towards your deductible. Unless you pay little in taxes, this option can greatly reduce the amount of money you spend on health care.
What’s the Downside?
The downside is a high deductible. You will be responsible for a significant amount of your actual health care bills. But the cost savings and lower monthly premiums will often outweigh the potential high cost of the deductible. Still, a high deductible health insurance plan is best for those who will actually save towards the deductible. If you do have a major medical problem, you will not want the added stress of trying to figure out how you are going to pay your deductible. The worst thing you can do is delay care because you haven’t saved or don’t want to spend what you’ve saved towards your deductible. If you don’t think you will save, or spend, towards the deductible, you are probably better off getting a high premium, low deductible plan.
Who Buys HDHPs?
The average, young healthy person will not satisfy the high deductible in a typical year and can often realize major savings through an HDHP. While it is a common perception that frequent users of medical care will not benefit from a high deductible plan, that is not always the case. Essentially you have to weigh the greater amount of the deductible you may pay against the savings from the premium and the tax deductions. This is best done by comparing quotes and doing some math.
Where To Buy
Pricing on HDHP plans can vary widely. Make sure you look at all the quotes available. Hands down, eHealthInsurance is the best place to do this. They don’t require contact info to see plan details, like other sites do. And if you need more help, you can call them. If you use a local broker, make sure they give you the details on many different plans. Each provider can have several different levels of deductible, so it really pays to examine your options.
What are the Requirements?
The minimum deductibles for 2011 for a plan to be considered high deductible were $1,200 for individuals, $2,400 for families. Many plans have deductibles much higher then those levels.
Visit our page on Health Insurance Deductibles if you want more info on what a deductible is and what it covers.