Tips for Buying High Deductible Health Insurance

A high deductible health plan (HDHP) can be a good health insurance option for some individuals and families. An HDHP comes with low monthly premiums and terms that are relatively easy to understand. If you are thinking about this form of coverage, the following tips and information will help you buy a high deductible health insurance plan.

Understand How It Works

A high deductible health plan is a form of health insurance coverage. The “high deductible” part of the name comes into play because with this sort of plan, you will usually have higher deductibles than the deductibles seen in other forms of health coverage. The deductible is the amount of money you will have to pay out-of-pocket before the insurance plan kicks in. For example, if you have a deductible of $1,250, you will have to pay all medical bills and co-pays throughout the year until you have paid $1,250 out-of-pocket. After that, your insurance will kick in and cover all eligible medical expenses.

The trade-off to having a high deductible is lower premiums. You will almost always pay a lower monthly premium with a HDHP than you would if you had another form of health coverage. Lower monthly premiums make insurance more readily available to individuals and families that need low-cost options.

Know Your Deductible Options

Government regulations determine the minimum and maximum deductibles on HDHPs. As of 2013, the minimum deductible for a HDHP is $1,250 for individuals and $2,500 for families. The maximum deductible allowed for a HDHP is $6,250 for individuals and $12,500 for families. When shopping for insurance, you can find HDHPs with the minimum deductible, HDHPs with the maximum deductible, and HDHPs with deductibles that fall somewhere in between. The higher the deductible is, the lower your premiums are. It is important to find a good balance between a deductible you can afford and a premium you can live with on a monthly basis.

Preventative Care May Be Covered

No matter what type of insurance you have, preventative care is important for everyone. HDHPs purchased after May 2010 come with “built-in” preventative care. Under the terms of the Affordable Care Act, HDHPs must cover preventative care–even if you haven’t met your deductible. In 2014, the same law will begin providing financial assistance with premiums and cost-sharing for people who buy a HDHP through an exchange marketplace. This means that low- to moderate-income individuals and families will get a financial break on co-pays and deductibles, allowing them to pay less than those with a top-tier income.

An HSA Can Help

If you are worried about coming up with the money for your deductible, you can set funds aside in a special account known as a Health Savings Account (HSA). An HSA is a tax-advantaged medical savings account that is only available to people who have a HDHP. Funds deposited into this account are not subject to federal taxation. Any money that you do deposit can be used to cover deductibles, co-pays, prescriptions, and other eligible medical expenses. Unused money that is left in the account at the end of the year rolls over for use in coming years, so that you never have to give up money you deposited. There are limits to what you can deposit in an HSA, so be sure that the limitations will not impede your ability to cover your chosen deductible.

Shopping Around Is Important

As with any other type of insurance, the cost of a high deductible health plan can vary from carrier to carrier. It is essential that you shop around to find the best price Contact several different insurance companies to get a quote. Be sure to ask about deductible amounts, coverage limits, and monthly premiums so you can do a proper comparison.

Guest post from Payton Price. Payton writes for TermLifeInsurance.org.