10/04/2022
Tip #7: Consider a High-Deductible Plan
High-Deductible Health Plans (HDHPs) are designed to keep monthly premiums low. When you choose a Bronze or Silver plan on the Health Insurance Marketplace, you typically pay a lot less each month than you would for other plans. However, when you do seek care, you'll have to pay more in out-of-pocket costs.
In addition to lower monthly premiums, HDHPs have a higher deductible than traditional health insurance plans. That means there's a minimum amount you must pay out-of-pocket before the insurance kicks in.
How It Works
Once you've met your deductible and your insurance kicks in, the insurance company begins paying coinsurance. 100% coinsurance means the insurance company pays 100% of health care costs once your deductible is met. However, most HDHPs operate on an 80/20 basis – once you've met your deductible, they'll start paying 80% of your costs. You are responsible for the remaining 20%.
You'll continue paying 20% until you've met your out-of-pocket maximum for the year – the maximum amount you'd have to pay for health care in a calendar year. Once that maximum is met, the insurance company begins paying 100% of your health care costs.
Real-World Example
Let's say you chose an HDHP with the following:
$2,000 deductible
80/20 coinsurance
$4,000 out-of-pocket maximum
On that plan, you would pay a low monthly premium each month. You would also pay higher out-of-pocket fees for doctor appointments, urgent care visits, lab tests, and other nonpreventive types of care.
The amount you'd pay for each health care visit would accumulate until it reached your $2,000 deductible. At that point, the insurance company would begin paying 80% of your health care costs. You'd then be responsible for 20% of those costs until you reach your maximum out-of-pocket of $4,000.
For a $3,000 doctor's bill, you'd pay $2,200 total: $2,000 to meet your deductible, then 20% of the remaining $1,000 that's due, or $200.
For a $12,000 doctor's bill, you'd pay $4,000 total: $2,000 to meet your deductible, then 20% of the remaining $10,000 that's due, or $2,000.
For a $200,000 doctor's bill, you'd still only pay $4,000 because that's your out-of-pocket maximum for the year.
As you can see, the monthly premium and deductible are not the only costs associated with an HDHP. You also have to consider the initial out-of-pocket costs, the coinsurance (how much the insurance company pays once your deductible is met), and the out-of-pocket maximum (the maximum amount you'd have to pay in a given year).
A high-deductible health plan could be right for you if you're generally healthy, don't anticipate any major upcoming health care costs, and aren't planning any major surgeries in 2022.
If you’re considering one of these plans, you should also consider setting aside money in an emergency fund or a health savings account (HSA) to help you pay for out-of-pocket costs.
Ready to choose an HDHP? Choose one that includes Advocate Health Care.
