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Should you switch to a high deductible health plan (HDHP)?

Weighing the pros and cons of whether an HDHP might be the perfect fit for you.

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'Tis the season to go shopping for a health insurance plan. Open enrollment on the Affordable Care Act’s (ACA) Health Insurance Marketplace kicked off on November 1, 2021, and you have until January 15, 2022 to enroll, re-enroll, or change your health insurance plan.

One option you’ll be able to choose from is a high deductible health plan (HDHP).

Let’s start with some basics: A deductible is the amount you pay for healthcare services before your insurance plan kicks in and covers the rest. Say you have a $2,000 deductible. That means you’ll always pay the first $2,000 of the services you receive.

HDHP plans, by nature, have a higher deductible than more traditional-type health insurance plans. So, the monthly premium is usually lower, but you end up paying more healthcare costs before insurance kicks in. For 2022, any plan with a deductible of at least $1,400 for an individual or $2,800 for a family is considered an HDHP.

Now, you might suspect that anything you pay less for up front — like an HDHP plan — is popular, and you’d be spot on. More than half of the American workforce is enrolled in HDHPs.

And here’s the thinking: If money tends to be tight in your household, it could be tempting to choose a plan with the lowest monthly premium (or cost), says Jeffrey Kullgren, M.D. He’s an associate professor of internal medicine at the University of Michigan Medical School and Institute for Healthcare Policy and Innovation in Ann Arbor, Michigan. But HDHPs can also be deceptively costly: An HDHP’s total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) could be as much as $7,050 for an individual or $14,100 for a family (and it could be even more for out-of-network services).

Clearly, there are advantages and disadvantages to purchasing an HDHP. Here are a few to consider.

Interested in exploring a HDHP? Contact a licensed insurance agent at 1-800-273-8115 to see if there’s a UnitedHealthcare ACA plan offered where you live.

The Pros of High Deductible Health Plans

You’ll pay less each month. If you’re young and in good health and anticipate only needing preventive care like annual wellness exams or screening tests, then an HDHP could be a good choice for you, says Dr. Kullgren. These items are covered 100% when you stay in-network.

But be smart about it too. “[You should] ask yourself, if you were to have a situation where you needed medical care urgently, or were in an emergency situation, would you have enough money on hand to afford it?” adds Dr. Kullgren. If the answer isn’t “yes,” maybe it’s not the right type of plan for you.

You may gain a tax-advantaged spending account. Many high-deductible health plans are paired with a health savings account (HSA), which is exactly what it sounds like: a type of savings account that lets you set aside money on a pre-tax basis to pay for medical expenses like deductibles, copayments, and coinsurance (unfortunately, you can’t use an HSA to pay premiums.)

Since an HSA is tax-advantaged, it immediately starts helping you save money. In 2022, you can contribute up to $3,650 to cover yourself alone and up to $7,300 for family coverage.

Maybe the best part? If you don’t use your HSA, the funds you save in it can be rolled over each year. An even bigger bonus? Since HSAs are considered an investment account, they can earn interest or other earnings, tax-advantaged, too.

That said, HSAs are often under-used, says Dr. Kullgren. A 2020 study he co-authored in the medical journal JAMA Network Open found that just under 60% of all people enrolled in a HDHP had an HSA account. And even when they did have one, more than half hadn’t contributed to it over the past year.

“It’s not something everyone’s able to afford,” points out Dr. Kullgren.

The Cons of High Deductible Health Plans

You may end up putting off medical care. Since you have to pay out of pocket for anything that’s non-preventive — say, you sprain your knee playing in a Sunday softball game — you may be inclined to avoid potentially costly medical visits or diagnostic procedures points out Peter Ubel, M.D. He’s a physician and professor of business, public policy and medicine at Duke’s Fuqua School of Management in Durham, North Carolina.

This may lead to greater healthcare costs down the road, since you’ve put off needed care, and now your knee aches every day. (Depending on your injury or illness, putting off care could even be life-threatening.)

Case in point: A Harvard University study published in 2019 in the journal Health Affairs found that HDHPs led to big delays in diagnoses and care for breast cancer patients.

Other research has found that people who purchase HDHPs skip healthcare altogether. “Patients don’t always know which exams are necessary and unnecessary,” says Dr. Ubel.

It can get expensive if you have a chronic medical condition. If you think it’s likely that you’ll cruise through your deductible, you’re probably better off shopping for a plan with a higher premium but lower out of pocket costs.

“It’s really important that people sit down and think about their healthcare needs over the next year, to make sure a HDHP is a good fit,” says Dr. Kullgren.

This is particularly true if you don’t think you’ll have time to shop around for the least expensive care, he notes.

Dr. Kullgren’s research has found that only 25% of patients who have an HDHP had talked to a healthcare provider about the cost of a service, and even fewer — only 14% — had shopped for tests or medical procedures. Only 6% had even tried to negotiate the price of a healthcare service.

“A lot of people don’t realize that doing all of this can help them get the healthcare they need for a more affordable price,” explains Kullgren.

The bottom line: HDHPs are not everybody. Make sure to choose the type of insurance plan that works best for you—and your wallet.

Got questions? Call a licensed insurance agent at 1-800-273-8115 to discuss your plan options.

Sources:

Duke University FUQUA School of Business. "peter a ubel." Retrieved from https://www.fuqua.duke.edu/faculty/peter-ubel. Accessed December 7, 2021.

Healthcare.gov. "Deductible." Retrieved from https://www.healthcare.gov/glossary/deductible/. Accessed December 7, 2021.

Healthcare.gov. "Health Savings Account (HSA)." Retrieved from https://www.healthcare.gov/glossary/health-savings-account-hsa/. Accessed December 7, 2021.

Healthcare.gov. "High Deductible Health Plan (HDHP)." Retrieved from https://www.healthcare.gov/glossary/high-deductible-health-plan/. Accessed December 7, 2021.

Healthcare.gov. "Preventive care benefits for adults." Retrieved from https://www.healthcare.gov/preventive-care-adults/. Accessed December 7, 2021.

Healthcare.gov. "When can you get health insurance?" Retrieved from https://www.healthcare.gov/quick-guide/dates-and-deadlines/. Accessed December 7, 2021.

Health Affairs. "The Challenges Of High-Deductible Plans For Chronically Ill People." April 22, 2019. Retrieved from https://www.healthaffairs.org/do/10.1377/forefront.20190416.47741/full/.

Health Affairs. "Vulnerable And Less Vulnerable Women In High-Deductible Health Plans Experienced Delayed Breast Cancer Care." March 2019. Retrieved from https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2018.05026?journalCode=hlthaff. Accessed December 7, 2021.

JAMA Network. "Use of Health Savings Accounts Among US Adults Enrolled in High-Deductible Health Plans." July 17, 2020. Retrieved from https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2768350. Accessed December 7, 2021.

Michigan Medicine Health Lab. "Study: People with High-Deductible Plans Don’t Act Like Savvy Shoppers." Retrieved From https://labblog.uofmhealth.org/industry-dx/study-people-high-deductible-plans-dont-act-like-savvy-shoppers. Accessed December 7, 2021.

State Health Access Data Assistance Center (SHADAC). "Percent of private-sector employees enrolled in high-deductible health insurance plans." Retrieved from http://statehealthcompare.shadac.org/bar/172/percent-of-privatesector-employees-enrolled-in-highdeductible-health-insurance-plans-by-total#0/1/a/32/205. Accessed December 7, 2021.

University of Michigan Center for Bioethics and Social Science in Medicine. "Jeffrey Kullgren, MS, MD, MPH." Retrieved from https://cbssm.med.umich.edu/people/jeffrey-kullgren-ms-md-mph. Accessed December 7, 2021.

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