The deductibles for an HDHP are often higher than the minimums set by the IRS, and they may be as high as the maximum OOP costs. Maximum OOP costs include deductibles, co-payments, and coinsurance. Deductibles exclude monthly fees and costs not covered by your HDHP, including out-of-network expenses. All plans bought through an Affordable Care Act (ACA) Marketplace and most through other means have to cover certain preventive services at an in-network provider no matter how much of your deductible you’ve paid. HealthCare.gov provides lists of preventive services for all adults and those only for women and children.
HSAs and HRAs Can Help Cover Out of Pocket Costs
If you have an employer HDHP, it may be paired with a health savings account (HSA) or health reimbursement arrangement (HRA). In this case, you set aside income before taxes in an HSA to put money toward your deductible or to pay for health care as needed. However, HSA funds cannot be used to pay monthly fees. If your employer wants to, they are also able to pay into your HSA. Only an employer can fund an HRA. An HRA is an account your employer puts money in before it is taxed. To participate in an HRA, you may have to enroll in a health insurance plan. You may also be able to use the funds from the HRA for family members, but they might need to be enrolled in a health plan also. In some cases, HRA funds may be used to pay monthly fees. Also, the IRS has given some guidance on the types of preventive services HDHPs may offer without needing to meet deductible limits. You may not need to meet a deductible that is less than the yearly minimum. The initial list of these services was released in 2004, and the IRS added extra services in 2019.
Pros and Cons of an HDHP
If you are healthy and don’t visit the doctor often, an HDHP may be the cheapest type of health insurance plan you can get. If you have a small family, an HDHP may also work well. If you or your family members don’t have any existing medical conditions, or you may not have to pay too many medical bills, an HDHP might work well for you. An HDHP may also be right for you if you have enough savings to cover any costs. It’s not always possible, but if you choose an HDHP (this may be your only choice), you should work to have enough cash on hand to cover your deductible and other OOP costs. The number one downside to an HDHP is that you have to meet your deductible when you’re treated until you meet your OOP cost limit. At the same time, you’ll be paying monthly fees. They might be lower than those for traditional plans, but they may not be affordable if you haven’t maxed out your OOP costs for the year. Larger families can cause your out-of-pocket costs to increase. If you have children, your medical costs might be too high also because they tend to need more doctor visits than young and older adults. This means that you pay monthly for your plan, but you could also have $14,100 in costs to pay before your insurance kicks in. For example, say you have three very active kids. You pay $500 per month for insurance and have a minimum annual family deductible of $2,800. Your family has five emergency room visits in one year (three for the kids and one each for you and your spouse), each one costing $1,300. You’ve paid $6,500 for the visits and $6,000 for your plan this year. Your total health care costs for the year are $12,500. You have a max OOP of $14,100, so you could pay up to $7,600 more before your insurance helps out if there are any other doctor visits. Some people with an HDHP do not get medical help because they don’t have the money to pay for it, and they haven’t met their deductible. In a survey published in 2019 by the Kaiser Family Foundation, half of the adults said either they or a family member had gone without care from a doctor (or dentist) because it cost too much. If you have a chronic condition and need to visit doctors often, an HDHP may not be the best option for you.
