Health insurance options are varied, confusing, convoluted, and seem to update coverage options for each enrollment period. For people who have decided to move forward with choosing a healthcare plan, the next hurdle is understanding how cost factors into each plan, and what that means to participants over time. Someone aiming to strictly adhere to a ridged budget is likely going to find the appeal of a higher out-of-pocket plan with lower premiums, when compared to traditional insurance plans, too good to pass up. This type of plan is called a high-deductible health plan (HDHP).
According to Healthcare.gov, in 2020 the IRS defined an HDHP as one “with a deductible of at least $1,350 for an individual or $2,700 for a family,” bringing the annual expenses to no “more than $6,750 for an individual or $13,500 for a family.”
An HDHP is likely most appealing to a person who is generally healthy, rarely visits their regular doctor, and is single or has a small family, and are not expecting too many medical bills, and may find this is a more economical option than traditional health insurance plans. Individuals who are not as healthy or have an underlying or existing medical condition may find they are better suited to enroll in a different health plan.
Like any insurance plan there are pros and cons. It is up to the enrollee to review both sides of the coin and choose their plans accordingly for the coming year. Here are a few points to get started in thinking about the pros and cons of an HDHP.
When paired with a health savings account (HSA) the participant will be able to use these pre-tax funds for help paying eligible expenses (see below for short list and link to an extended list). Planning ahead, participants who contribute more pre-tax will be able to save more money in the long run.
Enrolled participants who rarely use health benefits or are not prescribed expensive medications will likely see that they save money and/or have lower monthly bills.
Unlike most HMO plans, plan participants will be able to expand their provider network as an HDHP is widely unrestricted.
HDHP participants may decide to forgo medical treatment until they have paid off their deductible. 34% of people find it difficult to afford deductible payments, and for this reason will likely delay obtaining routine healthcare.
The basis of the HDHP is that there is a higher up-front cost to the participant as the deductible must be fulfilled at 100% prior to the premium benefits kicking in. However, once the deductible requirement is satisfied, the participant will find premiums lower than most PPO plans. Participants can keep monthly out-of-pocket expenses lower by taking full advantage of their health savings account (HSA).
Added Stress and Frustration
Some employees may find the process of paying off the deductible prior to receiving support from the insurance provider to be stressful and somewhat frustrating, as the high deductible amount can be difficult to pay at one time.
HDHP and HSA
An HSA or health reimbursement account (HRA) is a type of account that allows participants of an HDHP to set aside funds for use on eligible medical expenses not covered by the health plan. Most employers who offer an HDHP will also offer an HSA. If the employer is not offering an HSA, the participant is usually able to obtain one on an individual basis.
Eligible HSA expenses include common over-the-counter medications (both prescription and over-the-counter medicines), CPR classes, laboratory fees, vaccines, physical therapy, ambulance fees, eyeglasses, and more. Ineligible expenses include cosmetics, dental floss, lotion, baby wipes, and low-calorie foods, among others.
The funds set aside for use in an HSA are considered tax-free (as the funds are migrated to the HSA pre-tax) and most accounts allow funds to rollover year-to-year at a maximum of $500. Employers have the option, similar to a 401(k) plan to offer contribution matching. To get the most out of your HSA account and keep your monthly fees/bills lower, make sure you are tracking spending appropriately and applying the right purchases toward the HSA account.
Before deciding on the types of plans to offer employees, keep in mind that the priority should always be offering quality products and services to keep employees and their families healthy. Navigating the benefits enrollment process can be difficult—but not with VensureHR on your side. Contact us to speak with a benefits specialist about options for your business and your employees.