A high deductible health plan (HDHP) is a plan with a higher deductible than traditional health insurance. The premiums may be lower, but you have to meet a higher deductible (payout of pocket for more health care costs) before your coverage kicks in. An HDHP is often combined with a health savings account (HSA), which allows you to set aside pre-tax dollars to pay for medical expenses, reducing your federal income tax bill.
The IRS has a specific definition for a high deductible health plan that may be amended annually. For 2022, an HDHP is defined as any health plan with a deductible of at least $1,400 for an individual or $2,800 for a family, as stated on HealthCare.gov. Total yearly out-of-pocket expenses may not exceed $7,050 for an individual or $14,100 for a family. This includes deductibles, coinsurance, and copayments but does not include health insurance premiums. The out-of-pocket maximum does not apply to costs of health care received out of the health plan’s network.
How Do High Deductible Health Plans Work?
The key advantages of an HDHP are:
- It helps you save money on monthly health insurance premiums; and
- It allows you to open a health savings account (HSA).
If you are not anticipating many medical expenses for the coming year, choosing a high deductible health plan with lower premiums might make sense. Choosing an HDHP also makes you eligible to contribute to a health savings account, reducing your taxable income. You can use HSA pre-tax dollars to cover medical costs before you meet your deductible and for coinsurance or copayments once the deductible is met.
What About Preventative Care with a High Deductible Health Plan?
Another advantage of an HDHP is that it provides 100% coverage before you meet your deductible for preventative health care services from in-network providers. This is a requirement under the Affordable Care Act. For services under the preventative care category, you are not responsible for any coinsurance or copayments. Preventative services covered 100% include:
- Blood pressure screening
- Cholesterol screening for adults of a certain age or with a higher risk
- Colorectal cancer screening for adults ages 50 to 75
- Type 2 diabetes screening for adults ages 40 to 70 who are overweight or obese
- Certain adult immunizations, including flu shots
- Contraception for women
- Anemia screening for women
- Mammogram every one to two years for women over 40
- Cervical cancer screening for women ages 21 to 65
- Osteoporosis screening for women over 60
- Well-woman visits for women under age 65
- Autism screening for children at 18 months and 24 months
- Vaccines for children
A high deductible health plan may be the best choice for young and healthy individuals who are not on prescription medications, do not have young children, and are not planning to start a family. Young children tend to visit doctors more frequently, and the costs of hospital childbirth are high. Our agent can advise you of your options and help you choose the best health plan for you and your family.
