As defined by the Internal Revenue Service (IRS), a high deductible health plan (HDHP) refers to any plan that has a deductible of at least $1,300 US for self-only or $2,600 US for a family for 2017. While HDHPs have lower monthly premiums, health care costs are charged bigger, before the insurance company begins to pay its share, which is your deductible. Thus, HDHPs can still offer huge coverage for an array of services. When merged with a health savings account (HSA), it allows the payee to pay for certain medical expenses with money free from federal taxes.
Some of the advantages of an HDHP include greater control over how you intend to spend it, flexibility, allowing you to withdraw money any time without a tax penalty, and tax savings, which can help ease the payment. A study from the National Bureau of Economic Research revealed that employers that offered HDHPs reduced company healthcare costs over three years.
With the benefits come the risks of getting an HDHP. The Kaiser Family Foundation reports that the average yearly out-of-pocket costs of patients with high-deductible policies have significantly increased by almost 230 percent between 2010 and 2015.
The Affordable Care Act (ACA) or Obamacare can help decrease your deductible if you qualify for Cost Sharing Reduction (CSR) subsidies, which lower out-of-pocket costs for Silver plans purchased on Health Insurance Marketplace and payments for health insurance costs.
The low monthly premium may be definitely worth the high deductible for some people, especially for millennials, observed as the most likely demographic to buy HDHPs. Some may opt for the traditional health plans to pay for uniform costs. Deciding on whether high deductible health plans are right for you depend on your age, health, amount of savings, and willingness to learn the intricacies involved in HDHPs, such as differentiating generic from prescription drugs or learning the cost of an emergency room. You may, at your discretion, also make use of supplemental insurance help specifically designed for high deductible plans.
By Dez Duran-Lamanilao