While there are many kinds of health plans to choose from, two of the most common are traditional health insurance plans and high-deductible health plans (HDHPs). Traditional plans have lower deductibles and higher premiums, while HDHPs have higher deductibles and lower premiums. Learn more about the two and how they differ, so you can decide which, if either, is right for you.
What’s the Difference Between a Traditional Health Insurance Plan and an HDHP?
Once you have met your deductible, you may only need to pay the coinsurance, which is a percent of the total bill. These plans also have a cap on the costs you have to pay on your own, in a given year. Once you have met the out-of-pocket maximum that year, the plan pays the rest. In order to keep your costs low, it’s best to stay within network when choosing a doctor or going in for an office visit. On the other hand, a high-deductible health plan (HDHP) has a high deductible that you must meet before the plan will start paying its share of your office visits, lab tests, and prescriptions.
Costs
If you are concerned about how much each plan could cost you, try adding up the yearly cost of each premium and the maximum out-of-pocket amounts for each plan. This will give you a rough figure of how much each plan could cost you. You also need to factor in the deductible, as this gives you an idea of how much money you will have to pay early on in the plan year. Traditional Plan Example: Let’s say you have a traditional plan that costs $290 monthly, with an annual deductible of $1,000, a coinsurance of 20%, and an out-of-pocket maximum of $2,000. This plan would cost you, at most, $5,480. $290 x 12 = $3,480 + $2,000 = $5,480 If you spend to the max on this plan, it would look like this: You pay copays and all costs until you reach your $1,000 deductible. After that, you would pay 20% of all costs for the remaining $1,000 until you reach your out-of-pocket max. HDHP Example: If you have an HDHP plan that costs $110 per month and has a deductible of $5,000, a co-insurance of 50%, and a maximum out-of-pocket of $8,000, you would end up paying, at most, $9,320. $110 x 12 = $1,320 + $8,000 = $9,320 If you spend to the max on this plan, it would look like this: You pay copays and all other costs until you reach your $5,000 deductible. After that, you would pay 50% of all costs for the remaining $3,000 until you reach your out-of-pocket max.
Which Is Right for You?
Choosing a healthcare plan comes down to your own needs and budget. Traditional health plans have lower deductibles, so this could be a better option for you if you go to the doctor often. It might also be a good choice if you expect to have major medical costs in the near future, such as having a baby. On the other hand, HDHPs have a high deductible that you must meet before the plan will pay its share of office visits, lab tests, and prescriptions. They also have lower premiums, which can save you money in the long run. If you are healthy and are looking for a way to cut costs, this may be a great option. Just be sure that you have the cash on hand or in a savings account to cover the costs upfront, should you need to see a doctor. Try making a list of all the healthcare needs you can predict over the next few years. Then add them all up to see which plan makes the most sense.
How to Find a Health Plan
Recall, there are many types of health insurance, and ways to buy a plan. Many people get healthcare plans through their employers, so you should look into this option first to see what they offer. You can also go through an independent health insurance company or a health exchange under the Affordable Care Act. Compare all of your options before making your choice. You may be able to find a plan that provides the best of both types of health plan, or one that fits your precise needs. When choosing a plan, take a close look at the following factors:
Your healthFinancial obligationsFamily members who need coverageRisks that you feel comfortable taking
In the end, it may turn out that neither a traditional plan nor an HDHP is the better option for you. Don’t forget that these aren’t the only two types. In that case, looking into other options may help you find a plan that checks more of your boxes when it comes to healthcare.
The Bottom Line
No one can tell you which plan is better, because it will depend on your personal health needs and your budget. If you go to the doctor often and want to make sure you’re sharing the cost of treatment with your insurer, the traditional plan might be right for you. If you’re mostly healthy and never visit the doctor outside of your standard checkup, then the HDHP might be the better option. It should not cost you much more than the cost of your premium; this would be much less than the premium on the traditional plan.
