Open enrollment (the period during which you can sign up for health insurance or make adjustments to your current plan) begins November 1st. This requires you to understand a large amount of terminology before making any financially significant decisions. One term you may come across is High Deductible Health Plan (HDHP).
The Washington Post notes that in recent years, “high deductible plans have increased, with low monthly premiums but requiring consumers to pay most of their initial medical costs out-of-pocket before the plan begins to cover them. “There is,” the report said. The reason for this may be that at first glance, the low premiums of these plans may seem like a bargain, but they may not be able to cover the costs of unexpected illness or not being able to budget enough for regular treatment. This is because there is a risk that you will pay much more if you do so. Read below to learn about the potential risks and benefits of choosing an HDHP.
What is a high deductible health plan?
In effect, high-deductible health plans “require you to pay higher out-of-pocket medical costs before insurance begins to cover eligible costs” compared to traditional health plans, according to Nerd Wallet. said.
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The amount you must pay out-of-pocket before coverage kicks in is known as your deductible, and there are certain limits a plan must meet to be considered an HDHP. According to IRS rules, an HDHP is a “health insurance plan with a deductible of at least $1,600 for individuals and at least $3,200 for families in 2024,” Investopedia reported.
Still, like traditional health plans, “HDHPs cover 100% of preventive care” and “cover other medical expenses,” Experian said.
What are the risks of high deductible plans?
“The big downside to choosing an HDHP is that the annual out-of-pocket costs can be high,” Investopedia said. “Participants in HDHP plans could incur out-of-pocket costs of up to $8,050 for individual plans and up to $16,100 for family plans in 2024.”
Another drawback is that the high cost of initial treatment associated with HDHP can “lead to poor health outcomes,” and “some people avoid going to the doctor because of the cost,” Experian said. Ta. Even if some people do eventually see a doctor, “they may withhold elective treatments or tests until later in the year, after accumulating other medical costs until they reach their deductible,” the paper said. It’s an approach that can be “particularly risky for people with chronic conditions such as heart disease and diabetes, who may miss opportunities for early intervention.”
Are there any benefits to high deductible health insurance?
Some people choose HDHP because it offers several advantages. For one, “in exchange for higher deductibles, you typically pay lower premiums,” USA Today said. As for how low it is, the Kaiser Family Foundation reports that in 2021, the average employee contribution for an HDHP plan with a health savings account was $95 a month for individual plans and $393 for families. The premium contributions were $110 and $525, respectively. For plans with low deductibles. ”
Another benefit is access to HSAs (Health Savings Accounts). These accounts “allow you to set aside money on a pre-tax basis to pay for qualified medical expenses, including deductibles, coinsurance and many other medical services,” USA Today said. Additionally, Experian said, “funds can grow tax-free and can be withdrawn tax-free as long as they are used for qualified medical expenses,” which can “potentially save you hundreds of dollars.”
When does a high-deductible health plan make sense?
When considering an HDHP, Experian says it’s important to consider “your medical history, current health, and budget.”
For example, Experian says that if you’re “young, healthy, single with no dependents,” “rarely go to the doctor,” or “in good financial standing,” you’re better off choosing a high-deductible plan. “It might make sense,” he said. This allows you to “pay for medical expenses” and “contribute large sums to your HSA.” It also helps if “your employer contributes to your HSA at a level that covers most, if not all, of your plan’s deductible.”
Investopedia notes that “Whether an HDHP saves you money always depends on the specific plan details available and your anticipated medical expenses for the year.”
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