What Do I Need to Know Before Switching to a High Deductible Health Plan?

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High Deductible Health Plans (“HDHP”), also known as consumer-directed health plans, require you to meet a deductible of at least $1,300 before they start paying for any health care services (other than a few preventative health care services).  However, many HDHPs have much higher deductibles—sometimes as much as $6,850 for an individual and $13,700 for a family.  HDHPs may be an appropriate choice for some consumers, but not for those who are regular health care users, those who cannot afford to pay health care costs out-of-pocket, or those who want to limit their financial exposure.

 

Who might benefit from an HDHP?

 

HDHPs may be a good choice for consumers in good health who have the financial resources to create a health care savings nest egg.  If you have an HDHP, federal law allows you to contribute untaxed dollars to a health savings account (“HSA”) to pay for certain medical expenses.  In 2016, you can contribute up to $3,350 for an individual and $6,750 for a family to an HSA.  Unused funds roll over from year to year, and after you turn 65 you can withdraw money for nonmedical expenses without paying a tax penalty.  If you are generally healthy and plan on contributing money each year to build up funds in your HSA, an HDHP might be a good option for you.

 

Who might not benefit from an HDHP?

 

If you regularly utilize health care services or if you do not have the resources to pay for unexpected or emergency services out-of-pocket, an HDHP may not be a good option for you. 

 

First, with an HDHP, you must pay for all health care services until you meet your deductible.  Keep in mind, this doesn’t just apply to tests and procedures, it also means you will pay the full cost of doctor visits and prescriptions.  Some unwary consumers find out too late that an expensive brand name medication with a monthly copay of $40 or $50 actually costs over $1,000 per month when they have to pay for it out-of-pocket.  If you decide to switch to an HDHP, make sure you know how much you will pay for medications and doctor visits before you sign your contract.

 

Second, your health can take an unexpected turn at any point.  Even if you are healthy now, you could develop an acute or chronic illness during the plan year.  Some people with HDHPs will delay diagnostic tests or health care because they are afraid they can’t afford their medical bills under the plan’s deductible.  However, waiting even one or two months to receive health care can lead to pain and even cause irreversible damage to your health.  When you compare HDHPs with other plans, make sure you choose a plan you can afford to use when you need it.  Your plan is only valuable to you if you can use it!

 

Finally, accidents and emergencies happen, and a trip to the emergency room can be expensive.  If you visit the emergency room with HDHP coverage, you will be responsible for the hospital’s charges until you meet your deductible.  That could mean nearly $14,000 out-of-pocket before your plan starts to pay for services if you have a family plan.  If you want to limit your financial exposure in case of an accident or emergency, you may want to consider a plan with a lower deductible.

 

What to consider before purchasing an HDHP:

 

  1. How is my health?
  2. How much do I plan on contributing to my HSA?
  3. How much do I anticipate I will pay out-of-pocket for doctor visits, medications, tests, and procedures?
  4. Can I afford to pay for my health care costs until I meet the deductible if I unexpectedly get sick or have an accident?

 

I joined OPIC as a staff attorney in 2011.  I specialize in life, health, and disability insurance law.  I know that consumers can find themselves frustrated with these insurance issues at very difficult times in their lives—during sickness, after an injury, and after the loss of a loved one.  I am grateful that I can utilize my expertise to educate and empower insurance consumers as they navigate these challenges.