Health insurance is confusing. There are all sorts of acronyms to learn, and lately, you may have noticed more of an emphasis on high-deductible health plans (HDHP). High-deductible health plans can be more affordable for both you and your employer. However, they might not be right for everyone. Sarah Fenimore, senior benefits analytst, UnityPoint Health, explains how a high-deductible plan works, as well as breaks down high-deductible health plan cons to help you make the best decision for your health insurance coverage.
High-Deductible Health Plans & Health Savings Accounts Explained
- High-deductible health plans (HDHP). This type of health insurance plan involves lower premiums and higher deductibles. In other words, you pay less to maintain your health coverage. However, a higher deductible means paying more during the time of service before your health insurance begins to pay.
- Health Savings Account (HSA). You must be enrolled in a high-deductible health plan to have an HSA. A high-deductible health plan HSA is a special type of bank account designed to help you pay for qualified medical expenses. You can change how much you put in, or contribute, to your HSA at any time, as long as you stay within the IRS contribution limits. The funds in this type of account carry over from year to year and belong to you even if you leave your job or choose another health plan. There are also tax benefits associated with an HSA.
- Flexible spending account (FSA). These accounts also allow you to set aside money for health care costs. With an FSA, you can only make adjustments to your contribution amounts during open enrollment or with a change in employment or family status. In most cases, an FSA is use it or lose it, meaning you have to use the dollars by a certain time, otherwise, you won’t get them back. Like an HSA, there are tax benefits associated with an FSA.
High-Deductible Health Plan Pros
- Paying less upfront to maintain health coverage. If you are switching from another type of health insurance plan and you don’t often use health care services, you will see an increase in your take-home pay due to lower premiums.
- Employer contributions. Often, employers will put money up to a certain amount into your high-deductible health plan HSA each year. All HSA money is your money to keep.
- Tax breaks. If you have a high-deductible health plan and an HSA, there are tax benefits. You can make tax-free deposits into an HSA, you can withdraw money tax-free to pay for qualifying health expenses and once you turn 65, the accounts turns into a traditional IRA. You will not pay income taxes on the money you withdraw for medical expenses.
- Covered preventative care visits. These services, such as well-child visits, annual exams, etc., are included in high-deductible plans at no cost to you, just like any other medical plan.
Things to Keep in Mind
- You may pay more upfront for health services. Unless it’s a preventative care visit, you’ll have to pay in-full for health services, until you meet your deductible. There is no copay involved, which could make doctor visits seem more expensive.
- High-deductible plans could equal financial uncertainty. Anyone enrolling in a high-deductible plan should be able to afford the out-of-pocket maximum dollar amount and deductible from day one, in case an emergency happens. It could be a financial struggle, if medical services are needed before you’ve grown your HSA. However, if you get into a difficult situation, most hospitals offer payment plans.
- Preventative care visits are free. These annual visits won’t cost you a dime, and you can use them to maintain your health in hopes of avoiding costly trips to the doctor during other times of the year.
- Virtual care is a great option. Common conditions, like rashes, ear infections, bronchitis, cough, urinary tract infection, vomiting, diarrhea, fever, respiratory infection, flu, sinus infections, sore throats and pink eye, can be diagnosed with the help of UnityPoint Health Virtual Care. All you need is a computer, smartphone or tablet, and you’ll be connected real-time with a provider. The fee might be covered by your insurance. If it isn’t covered, it’ll cost $39 or less per visit. This service is available 365 days a year, 24 hours a day.