If you have been wanting to reduce your health insurance premium, one route is high deductible health plans (HDHP). However, the downside is that these plans come with a much higher deductible and a higher out-of-pocket cap on your healthcare spending. Unlike conventional plans where out-of-pocket expenses can be flexible, most of HDHP put strict caps on healthcare spending for prescription drugs and in-network care. For a relatively low premium, the insurance will not kick in till you have met your deductible.
When to opt for an HDHP
The deductible can be defined as the out-of-pocket expenses which you pay before your insurer pays anything. In 2016, as per the Internal Revenue Service (IRS), an HDHP requires you to pay a deductible of at least $1300 if you have opted for an individual plan or at least $2600 deductible if you have a family plan. If you do not anticipate medical expenses in the upcoming year, it makes sense to opt for an HDHP and lower the premium. Chances are high that you will save a good amount of money. However you must be sure that you can afford the out-of-pocket expenses in a worst-case scenario. In case you fail to do so, you may end up in a medical debt. The interest which is added will make it difficult for you to clear the bills.
Foregoing Medical care is common
In HDHP although the premiums are affordable owing to the high deductible, the out-of-pocket expenses can be burdensome for the lower-income households. However this is far less than what they would have to pay had they been uninsured. While saving money is good, at the same time it has been witnessed that individuals with HDHP forego getting medical care due to the high deductibles. Over time, untreated conditions could snowball into serious health issues and escalate into complex health problems.
When deductibles become costly
Tom Lewis,a50-year-old corporate serving a private company was healthy and financially stable till April’16. In the early half of May when he witnessed abdominal cramps, he consulted the doctor. He was diagnosed with pancreatic cancer. He paid out $11,000 on his workplace policy as deductible and the bills started to pile up. Even after disturbing the retirement corpus, the couple still owes $10,000.
By now you must have deciphered the hidden costs associated with an HDHP. Additionally, it is important to understand how to manage the financial risks of the plan and make it more affordable. The following tips will help you to contain out-of-pocket costs when you have opted for a high-deductible health insurance plan:
- Taking advantage of preventive services: As per the Affordable Care Act even high-deductible health plans must offer preventive care without associated co-pay and co-insurance. Make sure that you take advantage of preventive care which can include cancer, vaccinations, wellness visits and health screenings. You can stay away from the doctor if you combine a good lifestyle with preventive care. Further, by taking advantage of the screenings you can prevent small issues from turning into major ones which can get expensive in the long run.
- Pairing HDHP with the Health Savings Account: You can either buy a HDHP from a health insurance company or get it from an employer. In a Health Savings Account you can deposit up to $6,750 for the family or up to $3,350 for an individual plan. Tax benefits are offered on the money you save to pay for medical expenses. The primary aim is to save money for your deductible. You are allowed to deposit money every year and it may take you a couple of years to save a substantial amount. As the premium on these plans are low, many deposit the money which they save on the premium in the HSA. Paired with an HDHP, an HSA will offset out-of-pocket medical expenses, dental and vision expenses with the pre-tax dollars. The IRS rules do not impact an HSA and there is no limit on the carryover year to year. Thus, it almost acts as a saving account. The best part of an HSA is that if you turn 65, you can withdraw the balance which remains in the account for any reason without a penalty.
- Pairing HDHP with Flexible Spending Account or FSA: This is another option which is available through the employer plans. The money which you put into this account can be used to pay for certain out-of-pocket healthcare costs. The FSA or flexible spending account is an employer benefit which allows account holders to set aside money for copayments, prescribed drugs, deductibles and costs of medical equipment such as bandages, crutches and diagnostic devices. When you use an FSA it will bring down your tax. As per the IRS declarations FSAs are limited to $2,550 every year per employer. In case you are married your spouse too can save $2,550 in the FSA with their employer.
- Save on the medications: You can avail medical treatment at the hospital without paying for it since there are many benefits of health insurance policies like cashless hospitalization at the network hospitals. Make sure you check the list of network hospitals to see if it includes any of your nearby hospitals, which is convenient in the event of a medical emergency.
- Avail discounts: Although the insurer will not pay till you have paid the deductible, there are discounts which are attached with hospitals and providers. As long as you use the in-network providers you will be entitled to those discounts. At times,health insurance providers have preferred provider networks where the discounts are higher.
- Estimating the cost of procedures and services:Few insurance companies will provide you with tools which help estimate the cost of medical procedures and doctor visits. You can use these tools to estimate the costs and prepare well in advance for the future expenses. For additional information you can get in touch with your insurer directly and find out how much a particular service is likely to cost.
- Shop for services: When you have opted for an HDHP and you need medical services, not only should you shop for the best provider but narrow down on the best price as well. You can make use of online price comparison tools. Make sure that you shop for the best prices on prescription drugs.
- Speak Up: A doctor may not be aware of the health insurance plan which you have. It is okay to say that you have opted for a high deductible plan. Tell the doctor that as it is going to cost you a good deal is there a lower-cost option. Most patients are not used to questioning the treatment which is advised, but it is always a good idea to ask questions and weigh the options and costs.
- Start with prevention: If you want to save money on HDHP, you can begin with prevention.You are in the control of your own health and it is essential that you take steps to prevent illness and disease. Adopt health promoting habits such as exercise, healthy eating and smoking cessation.
High deductible plans are appropriate for the people who are healthy and for couples without young children. If you rarely need prescription drugs and do not expect to incur significant medical expenses in the coming years, it makes sense to consider an HDHP. If you know that you need extensive medical treatment some-time soon, it makes sense to opt for a traditional plan with copays and lower deductible.
Many insurance companies offer plans which lie between traditional plans and HDHP. As per the plans copayments are offered for doctor visits and the higher deductible needs have to be met. In most cases the coinsurance amount is 20%. As there is no one-size fit all answer it is advised that you conduct research and compare the plans. Keep the above factors in mind if you want to make an HDHP affordable.