How to Effectively Manage the Costs of High Deductible Health Plans
More and more people are moving to high deductible health plans (HDHP). In 2006, only four percent of workers covered by their employer enrolled in HDHP plans. In 2015, that number was 24 percent.1 For those who bought their own insurance, 36 percent bought HDHP plans, and only 13.3 percent paired that with a Health Savings Account.2
The reason these plans are popular is that they tend to offer very low premium payments. However, the flip side is that the deductibles are high – generally the deductibles are near the 2016 legal out-of-pocket limit of $6,550 for a single person and $13,100 for a family. That means you pay this whole deductible amount (except for certain preventive care services if you have an ACA-compliant plan) before the policy starts paying.
The trend towards high deductible health insurance is accelerating, so it’s very important to know how to manage the financial risks of such plans. Here’s a few ways that can help –
- Pair your HDHP with a Health Savings Account (HSA)
You can get this plan through an employer or buy it directly from a health insurance company. Basically, you deposit up to $6,750 per year (pre-tax) for your family (or $3,350 for individuals) into a Health Savings Account and use that money to pay for health care services. The goal is to save the amount of your deductible. You may need a couple of years to do it, but you are allowed to accumulate funds (and collect interest) year-over-year. Because of the low premiums of high deductible health plans, many people use the money they save on their premium to deposit in the HSA.
- Pair your HDHP with a Health Reimbursement Arrangement (HRA)
This option is only available with employer-based plans and only your employer can contribute to an HRA. The employer deposits money into an account and then the employee will be reimbursed (tax-free) from the HRA for qualified medical expenses. You don’t have to pay federal income or employment taxes on HRA income.
- Pair your HDHP with a Flexible Spending Account (FSA)
This is another option available through employer plans. The FSA savings are pre-tax, but the accumulated funds must be spent every year. At the beginning of the year, you must decide how much you want to deposit in the account throughout the year (it can’t be more than $2,550 per year). Because the money doesn’t carry over year to year, this combination leaves you with the highest financial risk when paired with a high-deductible health plan.
- Estimate the cost of services and procedures
Some insurance companies provide tools to help you estimate the costs of doctor visits, medical procedures, etc. Use these tools to help you estimate yours costs and better prepare for future expenses. You can also contact your insurance provider directly for more information on how much a service may cost.
- Take advantage of free preventative care services and screenings
By taking advantage of free services and screenings, you may be able to prevent small issues from turning into big ones that could get expensive down the road.
Ready to start shopping for high deductible health plans in Wisconsin? Have a look at our HDHP plans here or get help from one of our knowledgeable and friendly customer service representatives at 800.362.3310.