It is getting closer to fall and that means, for most companies, time for open enrollment. This is the one time a year you can change your benefits through your employer (unless you have a “qualified” change during the year like having a baby or getting married). If your company doesn’t offer one already, there’s a good chance you’ll see a high-deductible health plan on your menu of choices this fall. There are a lot of different opinions out there about high-deductible plans, including the one recently voiced by the New York Times.
High-Deductible Plans Usually Begin Around $1,500 for an Individual
To start, let me explain a little about high-deductible plans. They are just what they say— medical plans with a large deductible that you must cover before the plan starts to pick up any costs (in most cases, before prescription drugs are covered too). That deductible is usually around $1,500 or more for an individual and $3,000 or more for a family. Most plans are offered along with a health reimbursement account (HRA) or health savings account (HSA) —both are accounts that you manage and your employer will likely contribute to. These accounts help you meet your deductible so you don’t have to pay the full cost out of your own pocket. HSAs are becoming more and more popular and they have some nice tax advantages—and, most importantly, the account is yours (not your employer’s). You take it with you when you leave, like your 401(k).
These Plans Have Both Advantages and Disadvantages
On the plus side, high-deductible plans almost always cover preventive care (so you won’t be paying for your annual exam or routine preventive screenings) and they usually have coverage for both in and out-of-network providers, which means you can see any doctor you want. They also have much lower premiums than other types of plans, sometimes even lower than HMOs, which restrict the providers you can see. But, of course, those lower premiums are because you’re on the hook for that deductible. So, what do you do?
To start, remember that insurance companies set the premiums and the deductibles—and there really are not that many deals out there in health care. If you’re in a plan with a lower deductible, your premiums are going to higher. If you have a higher deductible, your premiums will be lower. Just like auto insurance. Simple as that. The real question to consider is this: Do you want to pay more for your medical care each month when you pay your premiums, or when and if you need care?
Consider Your Health and Savings
Many people shy away from higher deductibles for health plans, even when they would benefit from that choice. So, do take the time to evaluate your choices. You could save yourself hundreds, maybe thousands, of dollars a year. If you’re healthy and don’t need a lot of ongoing care, a high-deductible plan is a logical choice. You’ll pay less in premiums—money that you can save for future needs. But, make sure you can stomach that deductible if you get hurt or sick. Ideally, you’d have at least the amount of your deductible in your health savings account or in your personal savings so you don’t needto worry. Be sure to calculate carefully if you cover your family. In most high-deductible plans, you’ll have to pay the full family deductible even if only one person needs care.
But, even if you have a lot of ongoing medical needs, a high-deductible plan may be the right choice for you. Look closely at your typical needs throughout the year. Your employer or health plan likely has a simple online tool you can use to calculate your total expenses. You may find that a high-deductible plan will offer more flexibility than other choices—so it's worth it even if you have to manage your ongoing expenses. Closely examine your prescription drug coverage and out-of-pocket maximum (the most you would pay in a year before the plan picks up all the costs) to ensure the high-deductible plan is right for you.
Tell us in the comments: Would you rather pay a high deductible or high premium?