The Lowdown on High Deductible Health Plans
What is an HDHP, and will it work for your health insurance?
Written by: Aaron Garcia.
A High Deductible Health Plan offers lower monthly premiumA premium is a fee you pay to your insurance company for health plan coverage. This is usually a monthly cost. payments and a higher deductibleA deductible is an amount you pay out of pocket before your insurance company covers its portion of your medical bills. For example: If your deductible is $1,000, your insurance company will not cover any costs until you pay the first $1,000 yourself..
With a high deductible health plan (HDHP), you pay out of pocket until you reach your deductible. When you reach your deductible, you pay copaymentsA copayment is the fixed amount you pay directly to your provider for medical services or prescription drugs covered in your plan. For example: If your plan includes a copayment of $20 for office visits, you'll pay $20 to your doctor whenever you have an appointment. and coinsuranceCoinsurance is the percentage of your medical costs that you pay after you meet your deductible. Your insurance company pays the remaining amount. For example: If you have a $1,000 medical bill and your coinsurance is 20%, you'll pay $200. Your insurance company will cover the final $800. until you reach your annual Out-Of-Pocket Maximum, and all approved services are covered 100%.
A Health Savings Accounts (HSA) can be set up with an HDHP.
If you don’t visit the doctor often, an HDHP has low monthly premiums along with a higher deductible. Your costs for annual preventive care are small, and you’re covered for any significant health costs after you meet the deductible. According to the CDC from 2007 to 2017, the percentage of Americans enrolled in an HDHP  increased from 10.6% to 24.5%.
High Deductible Health Plans are health insurance policies with low monthly premiums. The insurance company can keep these payments low because the policyholder pays more for doctor’s visits and procedures and must pay out-of-pocket up to the deductible. After that, their costs are subject to copayments and coinsurance charges, up to the out-of-pocket Maximum (OOP). Once an OOP is met, all eligible medical services are then covered at 100% for the remainder of the policy year.
Annual Deductible Limits
The Internal Revenue Service (IRS) determines the deductible and out-of-pocket limits each year. Please note that your plan’s deductible can be higher than these amounts. Your OOP, though, can’t exceed these maximum amounts.
2021 High Deductible Level
- Single: $1,400
- Family: $2,800
2021 Out-of-Pocket Maximums
- Single: $7,000
- Family: $14,000
If you expect only preventive care appointments for a policy year, an HDHP can save you money. If you think you or a family member may need surgery, have injury-prone young ones, a more traditional policy with copayments may make more sense.
Pros of an HDHP
- Lower premiums: HDHPs allow your health insurance coverage to be more affordable and a better fit for your budget.
- Essential Health Benefits and no-cost preventive care: HDHPs offer the same 10 Essential Health Benefits and no-cost preventive services as their more expensive counterparts.
- Great savings for healthy people: If you’re in good health, you may not ever come close to your deductible since you won’t spend much on doctor visits, prescriptions, or hospital stays.
Cons of an HDHP
- Emergencies are expensive: If you need unexpected care, the insurance company will not pay anything until you have met your high deductible. This usually means paying thousands of dollars upfront.
- Price becomes a roadblock: Paying full price discourages many customers from seeking medical attention for minor ailments. These small issues can become significant problems if gone untreated.
- Location matters: If your area doesn’t have high enough participation in a company’s plans, your deductibles may be too expensive for an HDHP plan to make sense.
Many HDHP customers also enroll in Health Savings Accounts (HSA). These savings accounts pay your deductible and other out-of-pocket medical expenses. You deposit pre-tax funds from your paycheck to cover medical services and costs. Additionally, HSA funds earn tax-free interest, roll over year to year, and are yours to keep no matter if you change your job or health insurance plan. Learn more about HSA plans and how they affect your health insurance.
If you’re struggling to pay your monthly premiums–or if you’re young and healthy–you may want to consider an HDHP. These plan structures offer the same basic levels of care you’ll find with other policies, but you’ll pay less each month. If you or a loved one is shopping for individual or family health insurance plans, give us a call. We’ll walk you through your options to find a plan that works for you.
Do I need a primary care physician in an HDHP?
Yes. Even though you’ll need to pay full price for your services, you’ll have a primary care physician to monitor your care and refer you to specialists. HDHPs give you the flexibility to see out-of-network providers and offset the higher cost with your HSA funds.
Do I need an HSA if I have an HDHP?
No. While you must have an HDHP to enroll in an HSA, you can have a High Deductible Health Plan without a savings account. HSAs are popular options with HDHPs because they offer a tax-free way to save for your deductible and pay your higher out-of-pocket costs. Without an HSA, you will have to pay with your taxed income, which means more money out of your pocket.
Are my prescription drugs covered?
Yes, but you are still responsible for any associated costs. Any payment for a prescription drug will count towards your annual deductible.