High Deductible Health Plans
A high deductible health plan or HDHP is a plan that will have lower monthly premiums but significantly higher deductibles compared to traditional health insurance plans. These plans are sometimes referred to as consumer-directed health plans because much of the preliminary health expenses will be the responsibility of subscribers. Much like traditional plans, the insurance provider will only start covering expenses once the annual deductible is met. HDHP policies may be combined with health savings accounts, allowing plan members to use tax-exempt funds to pay for certain medical expenses.
Basics of High Deductible Health Plans
The thresholds for high deductible health plans are defined by Internal Revenue Service guidelines. In 2018, the annual deductible for individual members in an HDHP plan should be at least $1,350 or $2,700 for an entire family covered by the same plan. Maximum out-of-pocket limits limits are set at $6,650 for an individual member or $13,300 for the family. Out-of-pocket expenses include all deductibles, copayments and coinsurance amounts but excluding expenses for out-of-network services.
IRS guidelines also specify that subscribers to a high deductible health plan cannot carry another health insurance. Additional insurance may be allowed only if benefits were restricted for certain conditions such as for a specific illness or disease, a set amount for hospitalization, accident coverage, disability, dental and vision care and long-term care services. In the case of spouses applying separately, one or the other may still qualify for a high deductible health plan even if one was covered by a non-HDHP policy.
Benefits of a High Deductible Health Plan
Paying lower premiums is the primary appeal of a high deductible plan. These plans charge monthly fees lower by a few hundreds compared to traditional POS or PPO plans, indicating that these are the better choices for people who do not anticipate needing a lot of health services during the year. Annual physical examinations, immunizations and well-visits are typically covered services with minimal or no additional fees under high deductible health plans. Savings on health insurance premiums and expenses can be significant under a high deductible policy for people who are generally healthy. Out-of-pocket expenses, including coinsurance and copayments, are charged at negotiated rates instead of market rates, resulting in more savings for subscribers. Unlike HMO health plans, network services are not usually restricted. HDHP policies may not even require a gatekeeper, usually the family doctor, to provide referrals to specialists. Policyholders can open a health savings account to help cover these expenses.
Disadvantages of the Plan
Members who suddenly face an unexpected health issue that requires more frequent visits to specialists, more lab and diagnostic tests than normal, therapies and prescriptions needed to address the illness or condition may be facing significant bills under this plan. The maximum amount would be equivalent to their policy’s stated maximum total for deductibles and out-of-pocket expenses specified in their plan. Although HSA savings may be applied to these expenses, policyholders are not allowed other coverage under non-HSA plans, other insurance plans including Medicare or maintain a flexible savings account or FSA.
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High deductible health plans do not work for everyone needing health insurance. This type of policy is best for subscribers who are in fair health, needing only basic health care services during the year. For this demographic, high deductible health plans will result to significant savings in health care expenses.