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High-deductible health plans have lower premiums and higher deductibles for important care, and may require enrollment in a Health Savings Account. Routine coverage and preventive care are generally not part of the deductible. However, sudden illnesses or emergencies can quickly deplete savings from lower premiums. Those with sizable assets may benefit from a high-deductible plan with an HSA, but those on lower incomes may struggle to pay deductibles. The plan may function like an HMO or PPO, with a group of doctors who can be seen without incurring higher fees.
A high-deductible health plan, often called consumer-led insurance, is a health plan with lower premiums and a higher deductible for important care, such as a hospital stay or surgery. At the same time, someone enrolling in a high-deductible plan may also need to enroll in a Health Savings Account (HSA). Typically, the person can pay the income deductible into this account and the money is not taxed. Deductibles range from as little as $1,000 US dollars (USD) for an individual, to several thousand dollars for family or couple coverage.
Some high-deductible plans allow you to open an HSA and others require a person to have an HSA. The money in the HSA may need to be spent by the end of the year or, in some cases, carried over to the next year of coverage. Also, some HSAs don’t allow a person to roll over money from year to year. If it is not spent it is lost. This is certainly not an advantage. As long as the money isn’t used for anything other than health care costs, it’s not taxable. However, in case of access to money, which is not always allowed, a person would pay taxes in full.
In the high-deductible plan, routine coverage such as preventive care or even visits to the doctor for an illness are generally not part of the deductible. People can pay a small or no co-pay for these types of care visits. Prescriptions can also be purchased at a discount without having to pay the deductible first.
The rationale behind the high-deductible plan is that people may be able to save on premiums. However, if an emergency occurs and people require more than basic care, they are likely to quickly lose the savings from a lower premium by paying a large deductible. Sudden illnesses or emergencies are hard to predict, so it’s something of a gamble on the part of the high-deductible plan purchaser.
Also, not everyone who signs up for a high-deductible plan has an HSA. They may not be able to meet the deductible debt and may find their creditworthiness shrinks rapidly if medical bills become difficult to pay. The high deductible plan with an HSA is usually your best bet, particularly if you are still earning an income and are relatively young.
Programs like Medicare now offer high-deductible plan options, but some analysts believe these options aren’t great for those on lower incomes. Some preliminary studies have found that some people go without needed treatment because they can’t pay their deductible, or even without preventative care or medication because they can’t meet the compensation.
The high deductible plan protects the person with sizable assets. People who can open an HSA with a deductible protect themselves at a relatively low cost from very expensive medical care that could cause them to reach retirement funds or lose assets. A high-deductible plan with a spending limit may not be a good investment since three or four days in the hospital can quickly hit a low limit.
Often the high-deductible plan functions like an HMO or PPO in some respects, because it has a group of doctors who can be seen to not incur higher fees. PPO plans are often better for some because they give a person access to more doctors. However, doctors outside of the health plan’s network can cost more than a standard co-pay.
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