What is a High Deductible Health Plan? How They Can Work For You
So, you bought a high deductible health plan. Or maybe you’re thinking of picking one the next time open enrollment comes around. Either way, a high deductible plan may be a great choice, but it’s important to know how they work.
What is a high deductible health plan?
High deductible health plans, also known as consumer-driven health plans, or CDHPs, are plans paired with a health savings account. These are plans that typically have higher deductibles than traditional plans. And they work a little differently than traditional plans. Here’s how:
- The premium, what you pay each month for your plan, is often lower with a high deductible plan.
- You pay more up front for your health care before your insurer starts to pay its share.
- With a high deductible plan, you pay all your costs until you meet your deductible . These costs include both medical care and prescription drugs.
You may be wondering what “all your costs” means. When we say all of your costs, we mean everything must be paid for at full price until you meet your deductible. So, if you go to the doctor’s office or take a medication, you’ll need to pay the full cost of that visit or drug until your deductible is met. Once your deductible is met, you’ll only have to pay your copay for that office visit or medication.
This is different than a traditional plan where people pay a copay at the doctor’s office or pharmacy. There is an important exception to paying the cost up front – and it’s a good one. A preventive care visit with your primary care doctor is covered with no out of pocket cost to you.
Learn more about deductibles, coinsurance and copays and how they work.
Mark gets his health plan through his employer. When open enrollment starts, he has two choices: a traditional plan with a middle of the road deductible and no HSA account and a high deductible plan paired with an HSA. Here’s how the costs shake out.
Standard traditional plan
High deductible health plan
*There are cases where a traditional plan may have a deductible that you might consider high, but is not classified as a high deductible health plan. Plans that can be paired with an HSA are considered high deductible health plans.
Mark picks the high deductible health plan paired with a health savings account. Each month, he pays a lower premium than he would with the traditional plan and puts some extra money into the health savings account. If he needs care beyond his yearly preventive physical exam, he pays the cost of his care until he reaches his deductible. His deductible must be met before his health plan starts to pay for his care.
Why Mark picked the high deductible health plan
To take advantage of a lower monthly premium payment and still get the same great care he would get with the traditional plan.
It made sense based on his family’s health and the past few years of health care expenses. He’s rarely sick and doesn’t expect any major health care expenses for himself or his family during his plan year.
During open enrollment, when he picked his plan, he selected how much he wanted to contribute to his health savings account so it’ll be there when he needs it. See more about HSAs below.
But, Mark knows that if he has an emergency, like a broken arm or unplanned surgery, or gets sick and goes to the doctor, he’ll have to pay his deductible before his health plan starts to pay for his care.
Let’s talk finances
I know, I know. People hate talking about money. But it’s important to understand your plan and the associated costs.
When you’re shopping for plans, you should also know that high deductible health plans have both individual and family out-of-pocket limits to protect you. An out-of-pocket limit, sometimes called out-of-pocket maximum or “max,” is the most you would have to pay during your plan year. If you have insurance through your employer, your plan year may also be called a benefit period since your coverage may start and end outside of the calendar year.
It’s important to make sure you can afford to pay the out-of-pocket maximum in case you have an emergency during your plan year.
To prepare for health care expenses beyond what’s covered before your deductible, you can use what’s called a health savings account, or HSA.
What’s an HSA?
An HSA is a savings account where you can put pre-tax money to pay for approved health care costs . See a list of eligible expenses. The money can be deducted from your paycheck before you get paid. Some employers also add to your HSA account as an added benefit. Check with your employer to see if that’s an option. Because the money is added to your account pre-tax, you get more bang for your buck.
Want to check your out-of-pocket limit? Log in to your hap.org account and click on “My Benefits.” It’ll display how much of your deductible and out-of-pocket limit you’ve met for the plan year.
Wrapping it all up
To recap, a high deductible health plan may be the right choice for you or your family depending on your family’s overall health and health care needs.
If you choose this type of plan, you’ll pay all your costs until you’ve met your deductible and then your plan will begin to pay its share of the costs.
Your deductible with a high deductible health plan will generally be higher than it would be with a traditional plan . Like we mentioned earlier, there are cases where a traditional plan – not eligible for an HSA – can have a high deductible so weigh your options when selecting the plan that’s right for you.
You can set up a health savings account, or HSA, to pay for approved health care costs with pre-tax money.
Sometimes people don’t realize they’ve purchased a high deductible health plan and end up with sticker shock when they go to use their plan. I hope I’ve done my job in explaining how they work so you can make a more informed decision about your care.
Make the Most of Your Health Plan with HAP’s Health Care Cost Estimator
Did you know HAP has a free tool to help you understand costs before getting care? You can search by treatment type, browse by medical condition and compare costs between providers.
This is especially important if you have a high deductible health plan because you can use it to estimate how much your care may cost before your visit.
10 Miles Could Save You Hundreds of Dollars
For some procedures, traveling a few extra miles could save you money. For instance, a provider who’s 10 miles beyond where you normally get care could offer the same service as a provider who’s five miles from you, but for hundreds less. It’s important to do your research before your visit.
Learn more about the Health Care Cost Estimator.
Even though preventive care is covered, sometimes it becomes diagnostic and changes the cost. See our related post: Preventive or Diagnostic Care: Know the Difference.