According to the National Center for Health Statistics, 43.2% of people under age 65 who have private health insurance selected a high-deductible health plan (HDHP) in 2017. These plans typically offer lower premiums, but there is concern that people don’t fully understand the risks associated with an HDHP.
In the following, we outline the advantages and disadvantages of a high deductible health plan.
Why Are High-Deductible Plans So Popular?
Before we explain why HDHP enrollment is growing, let’s review some basic healthcare terminology:
- Premium: The monthly fee a member pays to maintain their healthcare coverage
- Deductible: Members must pay this amount out-of-pocket before the health plan contributes to their bills
- Co-pay: A flat fee that the member pays for a service.
Compared to a PPO or HMO, a high-deductible plan offers lower monthly premiums. However, members have to pay for much more of their healthcare before their health plan kicks in.
Many people are attracted to the lower premiums that HDHPs offer. And for some healthy people, HDHPs are a good deal. Many high-deductible plans do not charge a co-pay or deductible for preventive care and annual checkups.
However, for your clients’ other healthcare needs, they will have to pay significant deductibles before their health plan starts to contribute. HDHPs have varying deductibles, but under federal law, they must be between:
- Individual: $1,350 and $6,650
- Family: $2,700 and $13,000
If your clients don’t anticipate significant medical expenses in their future, they might never reach their deductible, saving them money. However, if their healthcare needs increase, they will be left paying thousands of dollars before their health plan starts contributing to their bills.
To help fund these costs, some people combine their HDHP with a healthcare savings account (HSA). HSA contributions are tax-deductible, and your clients can typically use pre-tax payroll deductions to fund their account. Contributions rollover from year-to-year and can follow your clients if they leave their current work place.
High-Deductible Plans Aren’t in Everyone’s Best Interests
To be clear, HDHPs are not for everyone. If your clients anticipate significant medical expenses or are considering having a family, an HDHP might not be a good deal. And if they face unexpected health emergencies, they will have to pay a lot of their bills out of pocket. Unfortunately, many people lack the healthcare literacy to assess their needs, cost considerations, and their plan options.
As a broker, don’t be shy about gauging your clients’ healthcare needs and literacy. Most people won’t admit they don’t understand how to calculate out-of-pocket healthcare expenses or how to read a summary of benefits. When you incorporate explanations of basic healthcare terms and processes into your presentations, you can help them make better choices and demonstrate your dedication and value as a healthcare mentor.
As your clients start to consider their health plan options, many of them will have questions about HDHPs. These questions might help them decide whether a high deductible is best:
- Do you have any medical conditions that require ongoing treatment?
- Do you plan on having children this year?
- Does anyone in your family play sports or have high-risk hobbies?
- Does anyone in your family require prescription medications? If so, do you know their full cost?
- Does your HDHP option have tools that help people track their deductibles and out-of-pocket expenses?
- Can you afford to pay the full deductible if your medical needs change?
- Do you have an HSA?
Always encourage your clients to research their out-of-pocket costs and think seriously about their health risks before they select an HDHP. You should also educate them about other healthcare options, including membership in the Canopy Health network.
References
Martinez, M., Zammitti, E., Cohen, R. (2018, February). Health insurance coverage: Early release of estimates from the National Health Interview Survey, January–September 2017. National Center for Health Statistics. Retrieved from https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201802.pdf
