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What you should know about high-deductible health plans
Saving money with a low premium works for some people. For others, it may lead to worse health outcomes. Here’s how to decide if the risk is worth it for you.
Everybody wants a bargain. And if you’re shopping for health insurance, a high-deductible health plan (HDHP) might look like one.
“An HDHP allows you to take on some of the up-front risks in exchange for a lower premium,” says Danielle K. Roberts, a Medicare insurance expert and cofounder of Boomer Benefits. In other words, you pay less now, but there’s a chance you’ll pay a lot more later.
High-deductible plans are a gamble. If you never get sick, you’ll pay nothing more than your premium. But if you end up spending a couple of nights in the hospital, you might be on the hook for thousands of dollars.
(If deductibles are confusing to you, check out this simple guide.)
For 2022, the Internal Revenue Service defines an HDHP as a plan with an individual deductible of at least $1,400 or a family deductible of at least $2,800. And those numbers can go much higher. According to a report from the Kaiser Family Foundation, 19% of families with HDHPs have an aggregate family deductible of $6,000 or more.
These high deductibles don’t even represent the most you can spend. They apply only to health care services you receive within your network of approved providers. If you seek help from an out-of-network provider, you could end up paying even more.
So why do people enroll in HDHPs? Most do so because they’re willing to take the risk, says Roberts. They’re gambling that they won’t have any serious medical expenses.
If you’re shopping for health coverage and considering an HDHP, here’s how to decide if that gamble is worth it. (One benefit you don’t have to question: Using Optum Perks to save on your medications. Download our app to access instant coupons now.)
The downside of HDHPs
Studies have shown that low-income families with HDHPs are more likely to avoid visiting their doctor for general health issues. Faced with high costs, they’re also more likely to avoid filling prescriptions.
As a result, these people often experience poor health outcomes or suffer from severe financial repercussions down the line. This is especially true for people living with chronic illnesses.
Here are a few findings about HDHPs, based on studies led by Harvard Medical School and the Harvard Pilgrim Health Care Institute.
- People with diabetes who have HDHPs are 28% more likely to skip their medication than those with traditional plans.
- Families with HDHPs who have chronic conditions are more than twice as likely to experience financial stress related to their health care costs.
- People with epilepsy who have plans with high out-of-pocket costs are more likely to skip their medication. The study found that this not only jeopardized their health but also increased their health spending in the long run.
- Women diagnosed with breast cancer while on HDHPs might experience more delays in care. These include delays in diagnostic imaging, biopsies, early-stage diagnoses and chemotherapy initiation. This could be because they aren't able to pay the high out-of-pocket costs up front.
The takeaway from these studies? High-deductible health plans may compromise your judgment and undermine your health.
Who is most likely to benefit from an HDHP?
Despite their shortcomings, HDHPs aren’t all bad. Qualifying plans can provide full coverage on routine health evaluations such as mammograms, basic prenatal care, smoking-cessation programs and other preventive health services.
That means HDHPs might be a smart choice for people who don’t use their current health care plan often and are willing to risk that they won’t use it more next year.
“This consumer is someone who goes in for a preventive care visit every year and likely doesn’t anticipate any extra doctor visits,” says Roberts.
In other words, HDHPs may work for very healthy people. “These are the people who are going to take full advantage of all the preventive care options available to them,” says Roberts. “They will avoid doctor’s visits by staying healthy and shopping for low-cost prescriptions and medical procedures.”
Most important, these individuals will plan for future medical emergencies by contributing to a health savings account (HSA), Roberts adds.
Why adding an HSA to your HDHP is so important
An HSA is a tax-free account that’s open only to people with HDHPs. It allows you to set money aside for qualified medical expenses in the future. “It’s a great way to build up an emergency or rainy-day fund,” says Roberts. “So if something happens down the road, you’re covered.”
If you do end up going with an HDHP, an HSA is a smart way to reduce your risk. Every month, you can put some of the money you save on premiums into the account. For 2022, individuals can contribute $3,650 tax-free dollars to their HSAs. And families can deposit up to $7,300.
“You don’t pay taxes on the money going in or coming out, as long as you spend it on those qualified medical expenses,” says Roberts.
These include deductibles, copays, coinsurance and prescriptions. You can also use your HSA to purchase medication and medical devices from the Optum Store.
And the best part about an HSA: The money is yours forever, says Roberts. The funds roll over from year to year, and they continue earning tax-free interest. “If you have an HDHP with an HSA through your employer, you take all of the HSA money with you when you leave.”
Check out these 8 creative ways to use your HSA or FSA (flexible spending account).
Unfortunately, most people don’t take advantage of HSAs. In fact, about 1 in 3 adults enrolled in an HDHP do not have an HSA, according to a study published in JAMA Network Open.
HDHPs aren’t right for everyone. But the choice is yours to make. No matter which plan you choose, you want to be sure it puts you and your family’s health first.
If Optum Perks can help, we will. Consider downloading a discount card and carrying it in your wallet. Then all you have to do is show it at the pharmacy to see if you can get savings of up to 80%.
IRS definition of an HDHP: Healthcare.gov
19% of HDHP family deductibles are $6,000 or more: Kaiser Family Foundation
Families with HDHPs experience more financial stress: Health Affairs (2015). “Nearly Half of Families in High-Deductible Health Plans Whose Members Have Chronic Conditions Face Substantial Financial Burden”
Diabetes patients with HDHPs are more likely to skip medication: Journal of General Internal Medicine (2021). “Association Between High Deductible Health Plans and Cost-Related Non-Adherence to Medications Among Americans with Diabetes: An Observational Study”
Breast cancer patients with HDHPs experience treatment delays: Journal of Clinical Oncology (2018). “Breast Cancer Diagnosis and Treatment After High-Deductible Insurance Enrollment”
People with epilepsy with HDHPs are more likely to skip medication: American Journal of Managed Care (2018). “Cost Sharing for Antiepileptic Drugs: Medication Utilization and Health Plan Costs”
1 in 3 adults enrolled in an HDHP do not have an HSA: Journal of the American Medical Association (2020). “Use of Health Savings Accounts Among US Adults Enrolled in High-Deductible Health Plans”