High-deductible health plans offer low premiums with the understanding that members will pay more out-of-pocket costs if they need care until they reach the plan’s deductible.
High deductible health plans (HDHPs) can be an option if you’re looking for health insurance with low premiums.
Those lower premiums come with higher deductibles and out-of-pocket costs, though. So, you wind up paying more for health care services if you need it.
- High-deductible health plans (HDHP) have deductibles of at least $1,700 for single coverage or $3,400 for family coverage.
- One benefit of a high-deductible plan is that you can usually save money tax-free for future health care costs and employers may contribute money to those accounts.
- In a survey of 1,000 people, Insure.com found that nearly half of respondents with an HDHP said they chose the plan because it’s a more cost effective solution. Though HDHPs are seen as a low-cost health insurance option, most respondents with that type of plan said they haven’t seen any health care cost savings.
- About one-third of people surveyed with an HDHP said they’ve delayed health care because they didn’t want to pay the higher deductible.
What’s a high deductible health plan?
An HDHP is an option if you want to pay lower premiums and understand you’ll pay more for health care services. An HDHP has an annual deductible of at least $1,400 for single coverage and $2,800 for family coverage. A high-deductible plan has a maximum of $7,050 for in-network out-of-pocket costs for single coverage and $14,100 for family coverage. Those costs include deductibles, copays and coinsurance.
|What’s considered an HDHP||Single coverage||Family coverage|
|Maximum in-network out-of-pocket costs||$7,050||$14,100|
So, let’s say you have a deductible of $3,000. You’ve not used your plan for the year and you need a procedure that costs $4,000. With an HDHP plan, you’d pick up the first $3,000. Then your coinsurance kicks in after $3,000. Coinsurance is the percentage of the health bill you must pay after you reach your deductible. It’s often 20% or 30%. The health plan picks up the rest.
Millions have a high-deductible health plan, but a new Insure.com survey found that many sign up for an HDHP because their employer doesn’t give them a choice.
In a survey of 1,000 people in June 2021, Insure.com asked respondents about their health plans. HDHP members said:
- 31% of people with an HDHP said they chose the plan because it “made more sense for my situation.”
- 47% said it was more cost-effective.
- 22% said they didn’t have a choice and their employer only offered an HDHP.
Employers and health insurers have increasingly turned to high deductible plans as a way to bend the cost curve. Kaiser Family Foundation said 31% of people insured by employer-based health plans in 2020 have HDHPs — that was the highest percentage yet. HDHPs are second only to preferred provider organization (PPO) plans. Forty-seven percent of members in employer-sponsored plans have a PPO.
HDHP supporters say these plans give people “skin in the game.” In other words, they’ll be more engaged in their health care, avoid unnecessary care and reduce costs if they have to pay more for services.
Are HDHPs leading to lower health costs?
A key tenet of an HDHP is that it can reduce health care costs — both for employers and employees in lower premiums.
However, our Insure survey found that the vast majority of people with a high deductible plan haven’t seen lower health care costs.
Forty-nine percent said health plan costs are about the same with a high-deductible plan and 40% said health costs have actually increased. Only 12% said health insurance costs have decreased since enrolling in an high-deductible plan.
One drawback with an HDHP is that paying more for doctor appointments and tests may make people delay care.
We found that about one-third of HDHP members surveyed said they’ve delayed care because they didn’t want to pay the high deductible.
That’s a problem not just for the plan members, but the employer and health insurer, too. Delaying necessary care could lead to more health problems and higher health bills later.
Another concern is that people with high-deductible plans often say their plans aren’t educating them to improve health care decisions. High-deductible health plans were once commonly called consumer-directed health plans. A vital piece of those plans is educating patients to help them become better health care consumers.
Forty-three percent in the survey said they feel like a better health care consumer because of their plan.
How much are HDHP deductibles?
The average deductible for a employer-based plan’s single coverage is $1,644 in 2020 — nearly identical to 2019. The average deductible for HDHPs is $2,303 for a single plan, a slight decrease from 2019, according to Kaiser Family Foundation.
Insure.com found that respondents’ single plan deductibles are usually between $1,701 and $4,000. That’s well above the $1,400 threshold for a plan to be considered high deductible.
Here are what the survey respondents said single coverage deductibles are:
- Between $1,701 and $2,499 — 25%
- $2,500-$4,000 — 13%
- More than $4,000 — 4%
- Less than $1,700 — 44%
Kaiser Family Foundation said the average HDHP annual deductible for family coverage is $4,552 for high-deductible employer-based plans in 2020.
These deductibles are significantly higher than PPO and health maintenance organization (HMO) plans. However, those higher costs are offset by lower premiums.
Kaiser Family Foundation said the average premiums for plans in 2020 are:
|Type of plan||Employee premiums||Employers’ contributions||Total costs|
|All single coverage average||$1,243||$6,227||$7,470|
|All family coverage average||$5,588||$15,754||$21,342|
|Source: Kaiser Family Foundation’s 2020 Employer Health Benefits Survey|
What’s an HSA?
HDHPs are coupled with a health savings account (HSA). You can use the money to pay for health care now or you can save it for later care.
HSAs help members pay for their future care. About one-quarter of companies with health benefits offer an HSA in 2020, according to Kaiser Family Foundation.
HSAs are one type of health account. The others are health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs). Unlike HRAs and FSAs, you own an HSA and you can take it with you when you change jobs. HRAs and FSAs belong to the employer.
A member can contribute $3,600 per person or $7,200 for family coverage to an HSA plan per year. People over 55 can contribute another $1,000 on top of those limits.
Contributions are tax-deductible. An employer can also put money into the account to help you pay for health care.
What qualifies as a high deductible health plan for an HSA?
HDHP-qualifying plans must have a deductible of at least $1,400 for individuals and $2,800 for families in 2022.
That threshold increases a little bit each year.
How much are people contributing to HDHP health savings accounts?
HSAs are a way to save money for your health care, but we found that many with HSAs aren’t contributing to their accounts.
Here’s how much they’re putting aside:
- Less than $500 — 9%
- $501 to $1,000 — 10%
- $1,001 to $2,000 — 10%
- $2,001 to $3,000 — 7%
- More than $3,000 — 4%
- Nothing — 36%
Employers can also contribute money to savings accounts to help employees pay for health care. However, we found that 33% of respondents said their companies don’t give anything to HSAs. Here’s what employers are contributing:
- Less than $500 — 7%
- $501 to $1,000 — 11%
- $1,001 to $2,000 — 8%
- $2,001 to $3,000 — 3%
- More than $3,000 — 4%
- Nothing — 43%
What happens to my HSA if I no longer have an HDHP?
You can take your HSA with you when you leave an employer, but you can’t contribute to an HSA again unless you have an HDHP.
However, you can tap into an HSA to help pay for care regardless of your current health plan once you set up an HSA.
High-deductible plans in the ACA marketplace
The Affordable Care Act (ACA) exchanges’ high deductible health plans are called Bronze and Silver plans.
A Bronze plan insurer picks up 60% of your health care costs. You handle the remaining 40%. A Silver plan pays 70% and you pay 30%.
Much like a high deductible plan in the employer-based market, Bronze and Silver plans offer lower premiums with higher out-of-pocket costs.
Another option for people who want low premiums is short-term health plans. These plans offer limited coverage and low costs. They’re not technically classified as health insurance plans. Short-term plans don’t meet the ACA coverage requirements of what the federal government considers health insurance.
These plans often don’t offer many benefits. For instance, you may have trouble finding a short-term plan with maternity, mental health or prescription drug coverage.
Short-term plans are available for up to a year and you can renew two more times. So, in effect, you can have a short-term plan for three years.
However, some states forbid the plans and others restrict them to fewer months, such as only three or six months.
Short-term plans offer less protection than a regular high deductible or ACA plan. So, if you’re interested in these low-cost plans, you’ll need to read the fine print to figure out what the plan actually covers. Otherwise, you could get stuck paying for all of your health care bills.
Pros and cons of high deductible health insurance
Choosing a health plan depends on your choices, finances, providers and what you want from your plan. An HDHP can be the right plan if you don’t expect to need much health care over the next year. However, if you have a growing family or expect to need medical services, you may want to find a plan with lower out-of-pocket costs.
Here are the pros and cons of HDHPs:
- Lower premiums
- Offers the same benefits and coverage as other plans like PPOs and HMOs
- Health savings accounts let you save for your health care tax-free
- Employers may contribute to a savings account to help you pay for care
- Higher out-of-pocket costs
- You pay for all of your health care until you reach the high deductible and then pay a portion of the bill
- You might delay care because of costs
- Out-of-pocket costs can be expensive for people with chronic illnesses
High-deductible health plan advice
HDHPs can be a cost-effective solution, but you’ll want to follow this advice to get full advantage of your plan.
Don’t delay care
HDHPs have higher out-of-pocket costs than other health plans. That doesn’t mean you should put off health care to avoid those costs. Avoiding care may wind up costing you more in the long run and can hurt your quality of life.
Don’t put off preventive care either. Health plans must provide free preventive care like an annual physical. You shouldn’t avoid those appointments — even if you know you’ll wind up having to pay out-of-pocket for tests.
Having to spend more on health care services means it’s vital that you shop around for care.
You can check with doctors and facilities to figure out the most cost-effective options. You’ll also want to check quality ratings. It might not make sense if you go to a low-cost facility with lousy quality ratings.
Health plans often provide online price comparison tools for providers and prescription drugs.
Stay in-network as much as you can
Health plans have contracts with providers. These providers are considered in-network. In-network providers will cost you less than getting out-of-network care.
PPOs allow out-of-network care, but charge more for it. An HMO usually makes you pay the whole amount for out-of-network care. HDHPs vary as to whether they’ll pay for out-of-network care.
Make sure you understand your provider networks before signing up for a plan. Check with your providers to make sure they take the plan.
Review your health care bills
You pick up more of the tab when you have an HDHP. You should check each bill to make sure your plan is covering what’s required. If not, check with the insurer.
You can appeal a charge to the health insurer. You can request both an internal and external appeal.
Take advantage of your HSA
An HSA is a great way to save for your health care.
Try to contribute the max, so you’ll have tax-free money set aside for your health care. Remember that you can carry over money to the next year, so there’s no need to spend everything in one year.
In fact, it’s a good idea to save money for your later health care costs. If you’re 55 or over, you can chip in even more to your account. Putting aside more money can help you as you reach your senior years.
HDHPs are a low-cost solution for a health plan. However, these plans come with a downside — namely, more out-of-pocket costs. They can be an excellent choice for younger people who don’t have families. However, if you have a family or any health issue, you may want to decide on a plan with lower out-of-pocket costs like a PPO or HMO.
Insure.com commissioned OP4G to ask 1,000 people in June 2021 about their health insurance, including high-deductible health plans.