If you have stayed updated on recent news stories, chances are you have heard increasingly more on the topic of high deductible health plans. These types of health plans have gotten a lot of new coverage lately due to the low premiums that they provide. Even though low premiums might seem like an enticing selling point, there are many other factors that need to be considered. Determining if high deductible health plans are right for you is not an easy decision.
What Are the Pros of High Deductible Health Plans
1. Lower Monthly Payments
The biggest advantage that can be gained from this type of health plan is the ability to pay much lower monthly payments for medical coverage. This means that your monthly premiums are much more reasonable and you can actually save back some funds for the future in case you do need to pay your high deductible. This type of health plan was first introduced in 2004 and has become the popular way for people to save money monthly on health coverage. Monthly medical costs go down substantially with a high deductible health plan.
2. Ideal For Young People
Most young people do not deal with major illnesses and only have health coverage in case something were to happen unexpectedly. The probability of a medical expense is much lower for most young people and they feel that high deductible health plans give them adequate coverage, but still allow them to save on medical expenses in the long run.
What Are the Cons of High Deductible Health Plans
1. Not For Those With Frequent Health Needs
If you are dealing with a long-term health condition or have frequent medical needs, a high deductible health plan is not best for you. You will constantly be forced to meet the high deductible and will essentially be paying for all of your medical expenses with your own money. You need coverage that has a lower deductible and lowers your obligation of payment.
2. Premiums Can Rise
Even though low premiums are the biggest selling point of high deductible health plans, these low monthly payments can rise over time. As the monthly payment goes up it is no longer beneficial to be responsible for a high deductible on your medical expenses. It is important to know how the premium rates will increase before you choose a high deductible health plan.
3. Can Find Yourself Falling Over a Financial Cliff
With high deductible health plans, some of those that hit a health crisis may find themselves exceeding their yearly contribution limit. This is the case in more than 58% of families that contribute to high deductible health plans leading to a loss of high post tax dollars. This issue can be mitigated if the out of pocket maximum required of its users did not exceed the limits held under high deductible health plans.
Growing Popularity of High Deductible Health Plans
Health plans with high deductibles have really grown in popularity over recent years. More and more people are choosing this type of coverage. This type of health plan is similar to others that are available on the market, but it is slightly unique due to the high deductible feature. This high deductible is paired with a low premium that is much more affordable. Paying low premiums coupled with a health savings account can be the most profitable option for many people.
Concept Behind High Deductible Health Plans
The concept behind a high deductible health plan involves the client of the plan assuming all expenses until a predetermined deductible amount has been met. For example, if your deductible is $1,500.00 on your health plan, you assume all responsibility for the expenses until the 1,500.00 deductible has been met. Whatever expenses are greater than the $1,5000.00 deductible will be covered as a part of the health plan. This deductible is labeled as high, because it is set a lot higher than typical health plans. The insurer will cover the rest of the medical expenses once the deductible has been met in full.
Another unique feature of high deductible health plans that you should be aware of is the HSA savings account. This type of savings account coupled with your high deductible is designed to be a place where the insured person can put aside pre-taxed money that can be sued on medical expenses. Not only can the money that is put in this savings account be used for medical expenses, but also for investment opportunities. The only thing to be aware of is that all money from this type of account that is not used for medical purposes is liable for taxation.
Is a High Deductible Health Plan Right For You?
Deciding if a high deductible health plan is the right type of medical coverage for you is not always easy. There are a variety of different factors that must be considered. This means that you need to be fully aware of both the pros and cons associated with high deductible health plans. This will help you to make the most informed decision.