A high deductible health plan, often called consumer driven insurance, is a health plan with lower premiums and a higher deductible for major care, like a hospitalization or surgery. At the same time someone enrolls in a high deductible plan, he or she may also need to enroll in a health savings account (HSA). Generally, the person may put up to the amount of the deductible from income into this account, and the money is not taxed. Deductibles vary from as low as 1000 US dollars (USD) for an individual, to several thousand USD for family or couple coverage.
Some high deductible plans allow one to open an HSA, and others require a person have an HSA. The money in the HSA may have to be spent by the end of the year, or in some cases, is rolled over into the next year of coverage. Additionally, some HSAs do not allow a person to roll over the money from year to year. If it doesn’t get spent it is lost. This is hardly an advantage. As long as the money is not accessed for anything other than health care costs, it is not taxable. However, should the money be accessed, which is not always allowed, a person would pay full taxes.
In the high deductible plan, routine coverage like preventative care, or even visits to the doctor for an illness are generally not a part of the deductible. People may pay a small co-payment or no co-payment for these types of care visits. Prescriptions may also be purchased at a discount without needing to pay the deductible first.
The logic behind the high deductible plan is that people may be able to save money in premiums. However, if an emergency arises, and people require more than basic care, they are likely to quickly lose savings from a lower premium, by paying out a large deductible. It’s difficult to predict sudden illnesses or emergencies, so it is something of a gamble on the part of the high deductible plan purchaser.
Further not all who enroll in a high deductible plan have an HSA. They may be unable to meet deductible debt, and may find their credit-worthiness quickly sinking if medical bills become difficult to pay. The high deductible plan with an HSA is usually the best bet, particularly if one is still earning income, and is relatively young.
Programs like Medicare now offer high deductible plan options, but some analysts believe these options are not great for those with smaller incomes. Some preliminary studies have found that some people go without needed care because they can’t pay the deductible, or even go without preventative care or medications because they can’t meet the co-payments.
The high deductible plan does protect the person with considerable assets. People who can open an HSA with the deductible protect themselves at a relatively low cost from very expensive medical treatments that might have them reaching into retirement funds or losing assets. A high deductible plan with a cap on spending may not be a good investment since three or four days in a hospital can quickly reach a low cap.
Often the high deductible plan works like an HMO or PPO in some respects, because it has a group of doctors one can see that will not incur higher co-payments. PPO plans are often better for some because they give a person access to a greater number of doctors. Yet doctors outside of the health plan’s network may cost more than a standard co-payment.
