High Deductible Health Plans

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Contributor, Benzinga
February 23, 2022

High deductible health plans (HDHPs) were created to lower the monthly health insurance premiums for insureds while having insureds under the plan pay more of the health costs and services. Depending on your unique situation, a high deductible health plan might be your best option.

This article explains what a HDHP is, how it works and why it can be beneficial. Comparisons of a few HDHP insurance providers can help you decide. 

What is a High Deductible Health Plan?

The IRS gives a clear definition of a HDHP. The federal government defines it as any health plan that offers a deductible of at least $1,400 for individuals and $2,800 for families. The yearly out-of-pocket costs for insureds cannot be more than $7,000 for individuals or $14,000 for families. Out-of-pocket expenses include deductibles, copayments and coinsurance. The out-of-pocket costs do not apply to services that are out of the network. 

Insureds covered by a HDHP can combine their coverage with a health savings account (HSA) that allows those who are insured by the plan to pay for certain medical expenses using tax-free funds. 

HDHPs may also be combined with a health reimbursement arrangement (HRA). An HRA is a health plan for medical expenses up to a certain dollar amount that is owned and funded by employers. Employees get reimbursed tax-free for qualified expenses. Employees who do not use the funds in their HRA can roll them over to the next year.  

How Does a High Deductible Health Plan Work?

An HDHP differs from a traditional health insurance plan in distinct ways. Your monthly premiums will be lower with a high deductible plan as opposed to a similar traditional health plan. 

Deductibles for HDHPs tend to be higher than traditional plans. While traditional health plans typically have lower deductibles, the amounts vary based on the plan and what the employer offers.

The out-of-pocket limits are also typically lower with traditional health plans, depending on the plan and the employer. Because you have to pay more in out-of-pocket costs with a HDHP, you are more likely to be cognizant of the medical costs you are incurring. 

Beyond these differences, a HDHP is eligible for an HSA or HRA, and a traditional plan is not.   

Benefits of an HDHP

A high deductible insurance policy can be intimidating if you have had lower deductibles in the past. Nonetheless, the benefits of an HDHP can outweigh the concerns over high deductibles. 

Here is an overview of the main benefits of an HDHP.  

Coverage for serious medical emergencies:

HDHPs provide coverage for more expensive medical costs such as emergency room visits and surgeries. The health plan pays a larger percentage of medical costs, and the insured only has to pay a small percentage of the costs. The out-of-pocket limit is the most you would have to pay in any plan year, making it easier to plan for annual medical costs. 

Affordable for those with low income:

People with low incomes often have difficulty paying their health insurance premiums, even when an employer covers some of the costs. An HDHP plan is affordable for most people no matter what the monthly premiums are. 

Tax-advantaged health savings accounts:

The money you or your employer put into an HSA or HRA is not federally taxable to employees. Most states also do not tax funds in HSA or HRA accounts, although a few states do. When you are paying thousands of dollars for medical care, the tax savings when using an HSA or HRA can add up. 

Covers preventative care without copays for: 

Under the Affordable Care Act (ACA), HDHP plans must provide preventative care at no cost for certain medical services. 

Some of the more common ones are:

  • Depression screenings
  • Blood pressure screenings
  • HIV screenings
  • Diet and nutritional counseling
  • Vaccines for diseases including chickenpox, flu and measles

The federal government also requires HDHPs to cover preventative services for women including the following:

  • Breastfeeding counseling
  • Bone density screenings
  • Mammography screenings and other types of breast care
  • Cervical cancer screenings

Children’s preventative services under ACA include:

  • Drug and alcohol assessments
  • Behavioral assessments and screenings
  • Immunizations
  • Vision screenings
  • Well-baby and well-child visits

These are only partial lists of the required covered preventative health services. You may find the full list at HealthCare.gov. 

How to Use a Health Savings Account

While HDHPs cover many health services, they do not cover many of the types of services most people use. An HSA is flexible, so insureds can use the funds to cover the unique services they use. 

For example, some families have many people who wear glasses, and others do not. Such families can use the funds in their HSA accounts to pay for eye exams, contact lenses or glasses. Families that do not need vision care coverage can use their HSA accounts to cover dental visits, chiropractor visits or other services. 

Here are some of the ways people use the funds in their HSA accounts:

Acupuncture:

If your physician prescribes acupuncture for pain relief as a supplemental treatment, you may use HSA funds to cover the costs. 

Deductibles:

Since HDHPs have high deductibles, it is allowable to use HSA funds to cover all or part of your deductible. 

Dental services:

Employers are not required to provide health coverage for dental care, and many of them do not or the coverage is limited. Insureds who do not have dental insurance can use their HSA funds to pay for cleanings, x-rays, fillings, root canals and other dental services. 

Vision care:

HSA funds can also be used to pay for eye exams, glaucoma screenings, glasses, contact lenses or eye surgeries. 

Prescriptions:

Drug prescriptions can be costly, especially for people who regularly need multiple prescriptions. HSA funds can reduce out-of-pocket expenses for medications. 

Copays:

Some medical services require a standard copay or coinsurance fee, and you can also use HSA funds to pay for your share of expenses. 

Psychiatric and psychological:

Certain mental and behavioral health services are not considered covered services, but you can use your HSA funds to cover therapy, psychiatric care and other related services. 

Compare High Deductible Health Plan Providers

Benzinga offers insights and reviews on some of the top high deductible health insurance providers to inform your choices. 

Blue Cross Blue Shield

Blue Cross Blue Shield has an extremely large network of independent health insurance companies that gives consumers a wide range of options for health insurance plans. The various companies within Blue Cross Blue Shield operate in different states, making coverage available for everyone. 

One of the benefits of Blue Cross Blue Shield health plans is that insureds can use their insurance almost anywhere in the country as long as their plan covers the necessary treatment. Blue Cross Blue Shield plans can include dental, vision, individual major medical and short-term medical plans.  

Insurance premiums for Blue Cross Blue Shield are competitive with other major health insurers. 

United Healthcare

UnitedHealth Group Inc. (NYSE: UNH) is the largest health insurance provider as determined by the number of its policyholders. However, not all UnitedHealthcare’s plans are offered in all states because of state regulations. 

The coverage UnitedHealthcare provides is popular for individuals and employers because the plans often come with added benefits and wellness programs. The company offers a handy smartphone app that provides in-depth health analysis, which is very popular with customers.

UnitedHealthcare offers individual health insurance plans as specified through various state health insurance marketplaces. It offers five tiers of coverages, including platinum, gold, silver, bronze and catastrophic. 

Anthem

Anthem Inc. (NYSE: ANTM) has a reputation for having some of the more reasonable rates for HDHPs. It is also one of the largest providers of high deductible health insurance plans in the country with 42 million health insurance providers in 14 states. 

Consumers who insure with Anthem will have access to over 90% of doctors and hospitals across the country. The Anthem brand is widely recognized by consumers and medical providers alike. 

The customer service department of Anthem is not as trusted as some of its competitors, and the company has an above-average rate of claims denial on average in the industry.

Cigna

The insurance premiums with Cigna Corp. (NYSE: CI) are competitive, making it a popular option for employers and consumers. Cigna has a large variety of provider network choices, and it offers Medicare and dental insurance for individuals and families in addition to major medical insurance. Consumers can only purchase Cigna health plans during the special enrollment period.  

Cigna is a strong health insurer that also offers standalone dental and vision policies in a limited number of states. The company offers four tiers of health insurance plans, including gold, silver, expanded bronze and bronze. 

Cigna is financially strong and gets an A-rating from A.M. Best and Standard & Poor, but customers do not rate the company as high as competitors for customer service. 

Aetna

Unlike some of the major health insurance providers, Aetna, owned by CVS Corp. (NYSE: CVS), does not offer individual health insurance plans or short-term health plans. 

Aetna offers Medicare, medical, dental and vision policies, which it offers through employer-sponsored health plans. Dental plans may be offered as part of medical insurance coverage or as standalone policies, although dental insurance is not available in every state. Aetna also offers disability and life insurance policies. Business owners can customize plans for their employees.

Aetna has an app called Attain, where insureds can monitor their insurance policies. Insureds can also track their health and fitness activities in real-time using an Apple watch. 

Humana

Humana Inc. (NYSE: HUM) is another health insurance provider that does not offer individual health insurance options. In addition to health insurance, Humana offers vision and dental insurance plans. Also, Humana offers Medicaid, Medicare and a variety of Medicare Advantage plan choices.

Humana offers three tiers of dental health insurance coverage with various deductibles, maximum limits and premiums. 

Humana is a leading provider of employer-sponsored health plans, including smaller businesses with fewer than 50 employees. Employees in the plan can get access to their health plan through an online portal. Like many other health plans, Humans offers a wellness plan and rewards its members for maintaining a healthy lifestyle.  

Health Care Service Corporation (HCSC)

Health Care Service Corporation (HCSC) is a financially strong health insurance company that is under the Blue Cross Blue Shield network. HSCS serves five states: Illinois, Texas, Oklahoma, New Mexico and Montana. 

HCSC is a customer-owned company and is not traded on a stock exchange. This company was one of the first medical insurers to offer health coverage for major medical procedures such as heart and bone marrow transplants and cancer and leukemia treatments. 

HCSC customers appreciate having access to their health information via a convenient mobile app and the company’s strong focus on wellness. 

The healthcare industry has undergone many changes since the ACA, and the regulations are continually changing. The nuances of healthcare insurance can be challenging to keep up with, and Benzinga is committed to keeping you up to date with the latest changes in healthcare insurance, other types of insurance and financial information. 

Frequently Asked Questions

Q

How much does an HDHP cost?

A

The costs for a HDHP vary significantly depending on what your employer offers or the choice you make on the Marketplace. For those who are looking for a HDHP on the Marketplace, buyers can choose from numerous plans that have the minimum allowable deductibles. Other plans with much higher deductibles, such as $3,500 for individuals and $7,000 for families, or even higher deductibles are also offered. The higher the deductibles you choose, the lower your premiums will be. 

Q

What qualifies as an HDHP?

A

A HDHP is any health plan where the deductible is at least $1,400 for individuals and $2,800 for families, although deductibles can be even higher. The other requirement is that out-of-pocket expenses (which include deductibles, copayments and coinsurance) for insureds may not be over $7,000 for individuals or $14,000 for families.

About Maurice Draine

Maurice Draine is a former insurance agent, broker, underwriter tech, and agent sales support rep with over 15 years of professional writing experience. Maurice helps insurance, financial, and various online and ad agencies, create the words that drive customers to their websites and keeps them there.