|  | Healthcare Industry | Health Insurance

High Deductible Health Insurance Policy

Health insurance is a necessity for most people. The 2010 Health Care Act made health insurance a mandate for all Americans. While many people have coverage through their employment, people who are self-employed may need to shop around for options. High deductible health insurance policies may be a viable option for those who want to lower their up-front costs, but they should be used with caution.

  1. What is a HDHP?

    • A High Deductible Health Insurance Policy (HDHP) is a type of health insurance that offers significantly lower premiums by requiring high deductibles on basic services. Some high deductible health insurance policies may be compatible with the use of Health Savings Account (HSA).

    Health Spending Account

    • HSA's are medical savings accounts. According to Go Health Insurance, these accounts are used with high deductible health policies that have a deductible over $1,100 for individual plans and over $2,200 for family plans. HSA funds are not subject to federal tax. Individuals are able to allocate funds into their Health Spending Accounts through direct deposit or payroll checks and the money is used for medical services. Prescriptions and medical bills can be paid through a health savings account.

    Benefits of High Deductible Health Insurance

    • Families and individuals in good health, with no history of medical problems, are the best candidates for high deductible health insurance policies. Choosing an HDHP will mean much lower premiums. Premiums are typically 40 percent to 50 percent lower than traditional health insurance polices. Additionally there are tax benefits to having an HDHP. Instead of using net income, people with High deductible health plans can use money from their HSA's which is not federally taxed. Another benefit is that most HDHP's cover catastrophic illness, and once deductibles are reached most plans do not require additional coinsurance payments.

    Risks of High Deductible Health Insurance

    • Having an HDHP will mean spending more out of pocket for basic doctor visits and prescriptions. Many consumers have a deductible of $1,000 to $2,000 to pay prior to receiving insurance benefits. These up front expenses help to keep the premiums of HDHP's down. If paying up to $2,000 per year for regular doctor visits is not feasible for a family, having an HDHP may not be the best choice. Additionally, pregnant women will incur a lot of up front costs prior to an HDHP kicking in to cover childbirth. According to The Washington Post's article entitled "High Deductible, High Risk", individuals with HDHP's will need to be careful with how they spend the money in their health savings accounts.

    Considerations

    • Some things to consider when researching a high deductible health insurance policy are your frequency of doctor visits and prescription use, your health history, and your ability to pay out of pocket expenses. If you have a pre-existing condition, a high deductible health insurance policy will not be the best fit for you due to high deductibles that must be reached prior to coverage.

Health Insurance - Related Articles