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4 Reasons You Should Enroll in a High Deductible Health Plan this Year

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With open enrollment around the corner for many individuals, we’ve summarized some of the main reasons you may want to enroll in a High Deductible Health Plan (HDHP) for next year. But first, you might be asking, what specifically is a high deductible health plan? A HDHP is a plan where for most services, an annual deductible applies where an individual pays the full cost of the service up to the deductible. After the deductible, costs revert to a co-insurance or copay structure for the remainder of the year or until you hit your out of pocket maximum.

The following are the reasons you should consider selecting a HDHP during your next open enrollment. For more tips on a successful open enrollment, be sure to check out our article on open enrollment readiness as well.

Reason #1: Save Money on Insurance Premiums

HDHP’s come with a lower price tag than their hybrid or copay plan counterparts because they encourage the member to be a better consumer of health care. In what way, you ask? Insurance carriers expect individuals facing a steep deductible to make more informed, cost and quality conscious decisions since most services will be on their own nickel up until the deductible.

If your employer offers you several alternative plan options, compare the premium savings plan to plan you would receive per pay period, and annualize the amount to see how far the premium savings they are offering you would go toward offsetting the annual deductible. Sometimes the savings more than covers it! Regardless, it gives you an idea of what type of out of pocket costs you would have to incur for the HDHP to not be worth it.

Reason #2: To Take Advantage of a Health Savings Account (HSA)

For HSA-qualified HDHP’s, which is most plans with deductibles over $1,400 / $2,800 Single/Family respectively, having access to an HSA is a huge benefit. Health Savings Accounts enable you to save money like no other funding mechanism with no risk of losing the funds if you don’t use them up in a given year. Specifically, funds that are set aside (usually through payroll deduction) into a health savings account are contributed on a pre-tax basis and aren’t even taxed when you use them for eligible medical expenses.

Then, when you do have medical services, you can pay for these or reimburse yourself with funds from your HSA, effectively giving yourself a 25% to 30% discount (or whatever the value of your tax bracket that would apply) at the doctor! Another great benefit is that you can invest some or all of your HSA funds, much like you may your 401-K or 403-B, but with penalty-free access to these dollars whenever you need them. Any growth on your investment also accrues on a tax-free basis. Finally, HSA’s can even be beneficial for those nearing retirement as they can be used to offset supplemental Medicare premiums.

Reason #3: Fears of Medical Bankruptcy are Severely Overstated

Every health plan is mandated to have an out of pocket maximum assigned to it. Think of this as your worse case scenario as long as you access physicians and services within the framework (i.e. network) your carrier directs you to utilize. If you don’t know the out of pocket maximum for the plans you are considering, be sure to ask your HR department. While the out of pocket maximums are often very high and intimidating, take the time to evaluate the plan benefits that kick in once you have met your deductible. For instance, in many plans, you would only be subject to a 10 or 20% coinsurance after reaching the deductible, meaning your “pace” toward the out of pocket maximum decelerates significantly.

Additionally, there are many resources to help you when you do have exorbitant medical expenses. For instance, most hospitals have charity care applications where they take your household size and income into consideration and often reduce your medical bill significantly.

There are also medical bill audit and negotiation vendors who will review your explanation of benefits and hospital bills for accuracy as well as negotiate with hospitals or providers directly on your behalf. Typically, these retain ~30% of the savings they achieve on your behalf.

Even if a health care provider is not willing to reduce the cost of the service they provided, they are almost always willing to work out a payment plan with little to no interest.

Reason #4: HDHP’s Motivate You to Reach Your Personal Health Goals

Let’s face it – those who don’t access medical services save a lot of money if enrolled in a HDHP, compared to more costly copay or hybrid plan design alternatives.  Sometimes, having a steep deductible in front of you is just the motivation you need to invest in that treadmill, join the walking group at work, or cut out that evening snack habit where you quickly layer on calories from the comforts of your recliner.

Regardless the changes an HDHP motivates you to make, whether diet, exercise, or to kick an unhealthy habit out the front door, much more than your wallet will benefit. Your overall disposition, optimism and energy levels will increase as you gradually check off those steps you know you need to take!  For more tips on pursuing personal wellbeing, be sure to check out our previous article here.

To High Deductible or Not

High Deductible Health plans are not for everyone as the out of pocket expenses can be quite high for a small percentage of individuals, especially for those with infusion treatments, expected hospital stays or outpatient procedures. However, it is worth doing the math as many have found navigating HDHP’s not nearly as daunting a task as they had anticipated.  For a more detailed review of how to successfully navigate a HDHP, be sure to review our previous article on this. How about you, when is the last time you considered an HDHP?

About the Author

Ben Lewis resides with his wife and four kids in Rochester, NY where he has lived since coming to Rochester for college in 2001.  After completing his Bachelors of Science in Mathematics at Rochester Institute of Technology in 2005, Ben went on to work at Excellus BlueCross BlueShield where he developed insurance rates for large fully insured and self funded employers.  During these years Ben also obtained his MBA in Finance from RIT.   With industry experience coming from a variety of rolls in finance, benefits consulting, marketing and even a brief stint as an HR Benefits Manager, Ben joined Consiliarium Group as a partner in April, 2019.  Brought on as the Strategic Healthcare Practice Leader, Ben’s responsibilities include heading up the Self Funded business unit, vetting emerging healthcare technology or vendor solutions, and championing the marketing efforts at Consiliarium.  

Ben’s ambition is to help employers empower individuals to pursue personal well-being by working with HR and Finance teams to employ smart, sustainable benefit solutions that meet individuals where they are at and simplify the journey for where they want to go.  When individuals are informed and empowered to become better consumers of healthcare, the results make it a win for everyone.

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