You had an excellent health plan for the 10 years you worked for your employer. Then coronavirus hit and you lost your job. You now find yourself looking at health insurance through a federal exchange. You are considering a high deductible health plan (HDHP) among your options. But is an HDHP your best option?
There is no black-and-white answer. Individual circumstances dictate that each consumer must look at all of the options and weigh the pros and cons of each. Only after research and well-reasoned thought can a wise decision be made.
With all of that said, you can go into your research with a better understanding of how HDHP’s work. Here is what you need to know, compliments of Dallas-based BenefitMall:
Lower Premiums, Higher Deductibles
No doubt insurance brokers have been working with their general agencies to come up with HDHP plans for their clients. And of course, the federal exchanges offer these plans. The plans are so named because they trade lower monthly premiums for higher deductibles. For some people, it is a simple math equation.
HDHP plans come with significantly lower premiums. How low depends on offered coverage and government subsidies. Needless to say that some plans are cheap enough to make them hard to ignore. But consumers pay more out-of-pocket when they do need healthcare services.
Higher deductibles can ultimately mean paying more in the long run. If you rarely get sick and have no underlying conditions, it might be worth the risk. But if you are the kind of person who sees the doctor frequently, an HDHP plan could actually cost you more when you factor in out-of-pocket expenses.
Higher Co-Pays and Coinsurance
HDHP plans are also known for higher co-pays and coinsurance. And in fact, minimum annual limits have been increased for 2021. The limits go up to $7000 for individuals and $14,000 for families. What does this mean? It means that, even though an HDHP plan you are looking at may not impose such high limits, it could. Carriers are allowed to go right up to the maximum.
Supplementing with an HSA
One way of getting around higher co-pays, coinsurance, and deductibles is to open a health savings account (HSA). The government allows employers to establish and contribute to HSAs if these offer high deductible plans. This could be the solution for you.
You may be fairly confident that going with an HDHP plan will not come back to bite you. But just in case, you could hedge your bets by contributing some of your savings to an HSA. You will still pay less per month, but you will also be putting away nontaxable money that you can use to pay for uncovered health expenses should the need arise.
Saving Should Be a Priority
Any decision to enroll in a HDHP plan should be made alongside a solid commitment to saving. Why? Because there is a tendency among HDHP plan users to incur medical debt. They choose the plans because they are more affordable. Yet when they actually do get sick, they do not have the money to pay their co-pays and deductible costs.
If you think the risk of accruing medical debt is high, saving money in as HSA – or any other saving vehicle – should not even be a question. The point of saving is to avoid medical debt. Accruing medical debt because you cannot pay your out-of-pocket expenses only makes matters worse.
High deductible plans have their purpose and place. That is why carriers, general agencies, and brokers offer them. Nonetheless, think long and hard before you sign up for one.