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Pros & Cons of an HDHP Insurance Plan

When it comes to insurance, the premium and the deductible move in opposite directions. That means you can potentially save a lot of money by purchasing a high-deductible health plan (HDHP) instead of a traditional one. But even though an HDHP can potentially save you money, also understand the potential drawbacks of these plans.

  1. Lower Premiums

    • Accepting a higher deductible shifts some of the risk from the insurance company back to you. As a result, the premiums on high-deductible health plans tend to be much lower than those on more traditional health plans. When evaluating whether a HDHP is a good idea, look at all of the costs, including the monthly premiums, the deductible and your total, possible out-of-pocket costs.

    Tax Savings

    • When you participate in an HDHP, you can also open a health savings account. You can then deduct the money you put into that health savings account when you do your taxes. This is turn lowers your taxable income and your tax liability. These tax savings can be very important, lowering even more the costs associated with the plan.

    Budgeting Problems

    • HDHP plans are not the right choice for everyone. In order to make a high-deductible plan work, you need to have a solid cash flow and the ability to meet those deductibles if you need to. A high-deductible plan can be an excellent choice if you are young and relatively healthy, but it might not make as much sense for someone with a serious, chronic health condition. If you feel you may not meet the required deductible, think twice about an HDHP. Having the health savings account can help, but you could still be left short, if you fail to plan properly.

    Skimping on Care

    • When you have an HDHP, you are responsible for paying the first couple thousand dollars of your healthcare costs. This could cause some people to skimp on the healthcare they need, including annual exams and recommended screenings. If you find yourself skipping medical appointments and trying to treat yourself, reconsider your HDHP.

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