High Deductible Health Plans (HDHPs)

What is a HDHP?

A high-deductible health plan, or HDHP, is often combined with a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) to provide insurance coverage. HSAs are tax-exempt accounts established to help pay for medical emergencies and treatments and can be used to pay for all qualified medical expenses not covered by your high-deductible insurance. HRAs are employer-funded accounts that when combined with a high-deductible health plan, reimburses employees for certain health care expenses.

HDHPs fall under the umbrella of Consumer-Driven Health Plans (CDHPs), an alternative to managed care plans. Consumer-driven plans encourage individuals to become more involved with their health care choices by giving them more of the financial responsibility. Giving individuals this responsibility is supposed to encourage the individual to make more informed and cost-effective decisions about their personal care.

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As the name implies, HDHPs have higher deductibles than managed care plans. You will pay lower premiums with an HDHP than you will with traditional health care plans; however, the minimum deductible for an individual can exceed $1,100. Because of these high deductibles, these plans are sometimes referred to as “catastrophic insurance plans.”

HDHPs also have a maximum annual out-of-pocket limit. For example, federal employees have an out-of-pocket maximum of $5,250. Once the maximum has been reached, the HDHP covers all in-network services. This includes things such drug costs, which are sometimes excluded from traditional insurance plans.

What is Covered by HDHP’s?

Some preventative care is covered by the HDHP, generally including physicals, women’s annual examinations, baby check-ups, and immunizations (preventative care coverage varies from plan to plan, so be sure to check carefully). These routine services will require a small deductible or co-pay.

Some plans have a yearly maximum amount for preventative services. Once you’ve reached that amount, expenses are out of pocket. Emergency room visits will only be covered by the plan after you have paid the deductible.

HDHPs: The Right Choice For You?

If you tend to only visit your doctor for routine and preventative services, you may enjoy the low premiums of a HDHP and the knowledge that your personal costs won’t be affected by other people in the plan. However, if you are a frequent visitor to the emergency room, specialists, or have chronic conditions that do not approach catastrophic limit levels, you may want to seek another option.