High Deductible Health Plan (HDHP) - What To Know Before Enrolling
Meredith Miller | Published: August 16, 2018
If you’re shopping for health insurance, you’ve probably come across high deductible health plans and their shockingly low monthly premiums. It’s tempting to cut corners when trying to save money, and with a high deductible plan, that’s exactly what you’re doing.
The thing about high deductible health insurance is that it isn’t for everyone. For some, it has the potential to save thousands of dollars in medical bills. For others, these plans can end up costing thousands of dollars that need to be paid out-of-pocket. If you’re considering a high deductible health plan and wondering if it will cost or save you money, here’s what you need to know.
What Is A High Deductible Health Plan?
A high deductible health plan (HDHP) is a traditional medical insurance plan that will typically offer cheap monthly premiums in exchange for an expensive deductible. Essentially, you save money up front, but may end up paying more out-of-pocket in the long run.
How An HDHP Works
There is no difference in how an HDHP works compared to any other policy with a deductible, the difference lies in where you spend your money.
In a more traditional health insurance plan, costs are spread out fairly evenly between monthly premiums and the out-of-pocket costs you incur. Here’s an incredibly basic example:
- Monthly Premium = $250
- Deductible = $2,000
In this scenario, you will end up paying $3,000 in premiums for the year, with an additional $2,000 deductible that you need to meet before your policy’s benefits kick in. So, if you receive a bill for $10,000, you will end up paying a total of $5,000 (factoring in premiums), while your health insurance company will cover the remaining $5,000.
Now, for a high deductible health plan, things may look a bit different. Take a look at what an overly simplified cost breakdown for an HDHP may look like:
- Monthly Premium = $120
- Deductible = $5,000
In this scenario, you will pay $1,440 in premiums for your benefit year but will have to pay $5,000 before your benefits actually kick in. So, if you were to receive that same bill of $10,000 when all is said and done, you will have paid $6,440 (factoring in premiums). So, even though you pay less each month, when the bills come, you may end up paying more.
Keep in mind that premiums do cover other benefits such as preventive services, so they are rarely factored into medical bills. However, for the purpose of this example, premiums were included to give a better understanding as to how HDHP plans work.
Who Should Consider High Deductibles?
From the example above, it’s easy to see the appeal of high deductible plans for those who rarely seek out medical services. If you don’t see out medical attention regularly, then your deductible shouldn’t be an issue. Here’s who should consider an HDHP plan:
- Teenagers or young adults
- Anyone who is in good health
- Anyone with a Health Savings Account (HSA)
- Anyone with a supplemental health insurance policy
Remember, these high deductibles can cost you thousands of dollars that you would otherwise be covered by your health insurance company. Here’s who should probably opt for a more traditional health insurance plan:
- Anyone with an extensive medical history
- Anyone on medication
- Anyone who plays an extreme sport
You may also not want to enroll in an HDHP if you are someone who doesn’t like to take risks. Whenever you cut corners on your health coverage, you always leave the door open for financial ruin. With the cost of medical services in today’s climate, an accident can leave you swimming in debt. If you’re concerned, choose traditional health insurance.
Enrolling In High Deductible Health Insurance Plans
If you think a high deductible health plan is right for you, FirstQuote Health has you covered (we can also help you find traditional plans or coverage with low deductibles). We work tirelessly to take the hassle out of shopping for health insurance, and making sure you find something that fits your needs. To find a high deductible health plan, enter your zip code and find quotes in your area in minutes!