By Terri Mangrum, guest blogger
Change isn’t easy, especially when it involves well-being and healthcare. When a high-deductible health plan (HDHP) became an unavoidable reality over a decade ago, many were fearful of making the change from a comfortable PPO co-pay health plan to the unknown HDHP. Some eased into the change, while others were thrusted into it without choices. Today, however, the HDHP is becoming the normal group insurance offering from employers.
Understanding an HDHP
For those not familiar with coverage under an HDHP, understand that the plan can be a very positive tool in managing your healthcare dollars. It comes down to how you approach and view the concept. An HDHP is all about total dollars spent over the course of a year. These plans make you view your healthcare spending with a broader lens.
An HDHP will have a higher deductible, which is paid completely by the participant before the insurance carrier will begin coverage. Once the deductible is met, coverage is paid by the carrier at a certain percentage until the annual out-of-pocket maximum amount is paid. Some HDHP plans may provide 100% coverage at the deductible amount. Also, once a participant meets the full out-of-pocket maximum amount, the insurance carrier pays 100%.
HDHP vs. PPO
While the cost of an HDHP may sound like a lot of money to spend up front, it is important to note that HDHP monthly premiums are typically significantly lower than PPO plans. A higher PPO premium means that you’re paying more each month, whether you use your insurance or not. Under an HDHP, monthly premiums are lower, and you pay your deductible amount only if you use your coverage.
If someone is a high user of coverage due to a chronic illness, he or she will more likely pay the deductible and/or out-of-pocket amount but will know what to expect to spend for their healthcare during the year. Keep in mind, dollars spent are offset by the lower monthly premium. PPO plans may have co-pays or co-insurance, but those can add up over multiple visits or with expensive procedures making financial planning more difficult and resulting in total out-of-pocket costs that may very well exceed an HDHP deductible.
Health Savings Accounts
Most HDHP plans also qualify for a Health Saving Account (HSA). An HSA is a bank account that a participant can open and make tax-deductible contributions. Employers can also contribute to these accounts, providing more healthcare dollars for usage. An HSA belongs solely to the participant for as long as the account is open, and it remains with the participant even if he or she leaves the employer. This money is available for qualifying medical expenses and can help with the deductible. The account can continue to grow each year, and funds can eventually be invested. HSA account balances can quickly add up with regular contributions, and if you don’t spend it—you keep it.
All in all, when faced with choosing healthcare coverage, consider an HDHP. They can be an annual money-saving tool for many. To learn more about HDHPs, the team at LBMC Employment Partners stands ready to assist and answer your questions. Contact us today to learn more!