- High-deductible health plans (HDHPs) are health insurance plans with higher deductibles but low monthly premiums.
- HDHPs offer multiple benefits, like lower monthly premiums, HSA eligibility, and other potential tax benefits, while also covering preventive care.
- HDHPs can be a good coverage option for healthy individuals who do not have frequent healthcare expenses, but they require members to pay their full deductible before receiving coverage.
In the search for a reliable healthcare plan, there are dozens of factors to consider. One of the biggest considerations is a plan’s deductible. A deductible is the amount of money you pay out-of-pocket for covered health care services before your insurance plan starts to provide coverage. High-deductible health plans are insurance plans with a high deductible and, usually, a low monthly premium.
Is it worth it to pay a higher deductible for a health plan? This depends on your lifestyle and healthcare needs, as there are several advantages, along with some potential drawbacks. This guide will help you weigh the high-deductible health plan pros and cons so you can take charge of your healthcare journey and determine whether this type of plan is a good option for you.
What Is a High-Deductible Direct Health Insurance Plan and How Do They Work?
A high-deductible health plan (HDHP) is a plan that features a higher deductible for the benefit of lower monthly premiums. These plans are popular choices as they are eligible for pairing with health savings accounts (HSAs), which allow you to move pre-tax earnings to an account you can use for qualified medical expenses.
The federal government sets benchmarks for what defines a high-deductible plan. For 2024, the IRS defines a plan as an HDHP if the deductible is at least $1,600 for individual plans or at least $3,200 for family plans. These plans also come with higher out-of-pocket limits—for 2024, these limits are $8,050 for an individual plan and $16,100 for a family plan.
An HDHP provides reliable coverage throughout the year and will begin paying for covered medical expenses after you’ve met your deductible. The nature of these plans means you may have to pay higher out-of-pocket costs before you reach your deductible.
Advantages of a High-Deductible Direct Health Insurance Plan
With the tradeoff of lower monthly costs, high-deductible direct health insurance plans offer several potential benefits. If you’re generally healthy and don’t have many medical expenses, these plans often save you money over plans with low deductibles and high premiums.
Lower Monthly Premiums
A higher deductible means you can pay less money each month on your premium, making these plans a cost-effective choice for some people. These lower premiums allow you to save money each month, which is especially valuable if you’re on a budget and do not often visit the doctor for more than preventive services.
High-deductible plans also often feature low costs for primary and preventive care, meaning that you’re not trading away access to necessary routine healthcare for lower premium costs.
Some of the preventive care costs covered include:
- Blood pressure screenings
- Regular checkups
- Some immunizations
- Mental health screenings
Incentivizing Cost-Conscious Healthcare Decisions
When you have low premiums and higher out-of-pocket healthcare costs, you’re likely to be more invested in your healthcare decisions and be more mindful about your spending. As a result, members of HDHPs are often more likely to seek cost-effective, high-value treatments and services.
These higher deductibles also make you more likely to track where your spending is going, making you overall more involved in your healthcare journey and the services you receive.
Promotion of Healthy Behaviors
In practice, a high deductible matters most when you actually use your health insurance plan. Therefore, a high-deductible health insurance plan is a motivator to avoid having to factor in any medical expenses at all.
These plans can encourage you to maintain healthy daily habits. Habits like eating better, exercising more, and practicing stress management techniques can all go a long way toward keeping you out of the doctor’s office.
Since many HDHPs provide access to low-cost preventive care, regularly visiting your primary care provider is another healthy habit that can help you maintain your well-being. Many health plan providers also have resources available for educating members on healthy habits and behaviors.
Tax Advantages and Health Savings Accounts
High-deductible plans also offer potential tax advantages that can offer significant savings that make the plans worthwhile long term, as they are typically HSA-eligible. By allowing you to save your pre-tax earnings, HSAs give you the most value out of your money, allowing you to use it without losing a percentage to taxes. Your HSA spending is also tax-free, helping you save even more money.
Many HDHPs qualify to have HSAs attached. The funds can then be used to pay for qualified health expenses. Some qualified health expenses include:
- Dental expenses
- Medical supplies, like hearing aids
- Seasonal immunizations
- Vision expenses
Disadvantages of High-Deductible Direct Health Insurance Plans
High-deductible plans offer reliable coverage without having to spend on high monthly premiums. However, because of their higher deductible, these plans may pose some drawbacks for individuals in the event of a healthcare need.
Risk of High Out-of-Pocket Costs
The number one concern behind higher deductibles is the potential for higher spending when seeking healthcare services. Because most plans do not cover your healthcare expenses until you meet your deductible, you may have to pay higher out-of-pocket costs when you have an unexpected healthcare need.
This is an important consideration, as you never know when a health emergency or significant health concern can happen. When weighing your health plan options, consider the out-of-pocket maximum and whether you’ll be able to manage the costs if an unforeseen health emergency does arise.
Delayed or Skipped Care
A potential byproduct of higher out-of-pocket costs is that people may delay seeking healthcare for the sake of saving money. For some, a high deductible may prevent them from using the plan and avoiding medical care entirely.
Delaying treatments can lead small health concerns to become more significant ones and pose risks for your long-term health, which can lead to even more serious medical care.
It’s important to have a balance between cost considerations and your actual health needs. If you’re concerned about the risk of covering out-of-pocket expenses, consider your other options before choosing an HDHP.
Need for Careful Budgeting
Since HDHPs can come with high out-of-pocket costs, you must be extra prepared if an unexpected healthcare concern arises. It’s important to have an emergency fund in case of a significant healthcare need, so you’ll need to be mindful of budgeting for one.
Unless you have money put away already, building this fund calls for saving a little more each month to put away for an unexpected health expense.
Is a High-Deductible Direct Health Insurance Plan Worth It?
Whether a high-deductible plan is worth it depends on you and your lifestyle. If you’re generally healthy and do not visit the doctor for more than routine preventive care, these plans can be a great option for saving you money.
Still, before deciding on a high-deductible health insurance plan, you should consider your own health needs, your current financial situation, and your level of risk. Some other important considerations to make include:
- Household changes – If you’re getting married soon or planning on having a child, you must consider potential healthcare expenses for the whole family.
- Young dependents – If you have young children to cover under your health plan, an HDHP may not be the best fit, as they are more likely to require healthcare expenses.
- Chronic conditions – Chronic conditions often require frequent treatments and medical expenses, which is not ideal with an HDHP.
- Age – As we age, we tend to visit the doctor more frequently, which means that healthcare expenses are likely to increase.
Consider your healthcare needs and how they may change in the upcoming year or two before committing to a new plan. However, if your situation is consistent, you take good care of your health, and you don’t have any expected high healthcare costs, an HDHP can be a good option.
Find a Plan That Meets Your Needs with Redirect Health
High-deductible health plans can provide an excellent solution for healthy individuals in need of an affordable plan. Ultimately, if you need quality healthcare coverage and don’t visit the doctor frequently, an HDHP can be well worth it. Still, it is always a good idea to consult an expert about your specific healthcare needs before deciding whether it is a good idea for you.
At Redirect Health, our direct healthcare plans feature low monthly costs while also providing access to quality healthcare when you need it. Our unique model combines our industry expertise with cutting-edge technology to navigate the uncertainties of the healthcare landscape and keep costs low, including access to no-cost preventive and primary care.
Explore our healthcare plans for yourself and see why members across the country trust Redirect Health to support them along their healthcare journey. Contact us today to learn more about how we go above and beyond to simplify your access to healthcare.