High-Deductible Health Plan Pros and Cons

What is a high-deductible health plan?

An HDHP is any health plan that typically has a lower monthly premium and a higher deductible than traditional plans. Here are some important details that can help you decide if a plan with a high deductible is right for you.

How does a high-deductible health plan work?

In general, your health plan starts paying for eligible medical expenses after you’ve met your deductible, meaning you’ve paid out of pocket up to the amount of the plan’s deductible. This applies to high-deductible health plans, as well as traditional plans.

The amount of your deductible depends on the plan you choose. If you choose a plan with a higher deductible, you may be required to pay more out-of-pocket costs in order to reach your deductible. There are some benefits of high-deductible health plans, as well as some drawbacks.

What are the pros and cons of high-deductible health plans?

Pros

• Lower monthly premiums: Most high-deductible health plans come with lower monthly premiums. If you anticipate only needing preventive care, which is covered at 100% under most plans when you stay in-network, then the lower premiums that often come with an HDHP may help you save money in the long run.¹
• Tax-free spending account: Some qualified high-deductible health plans may be paired with a Health Savings Account (HSA). You can use the funds in an HSA to help pay for eligible medical expenses. The money deposited into an HSA is tax-free, which can also help you save money.²

Cons

• Higher deductible: If your deductible is higher, it means you are required to pay for your medical care out of pocket up to that amount before your health plan begins to help pay for covered costs. The exception is for preventive care, which is covered at 100% under most health plans when you stay in-network.¹
• Costly out-of-pocket medical expenses: If you choose a high-deductible health plan and need non-preventive medical care, or costly medical care, you will have to pay all of your deductible before your plan begins to help you pay for covered costs. Depending on your medical needs, these costs could be significant out-of-pocket expenses that you may not have planned for.

When choosing between a high-deductible health plan and a more traditional one, consider your anticipated health needs. Are you likely to require medical care above and beyond preventive? If so, an HDHP plan with a lower monthly premium may not necessarily be an advantage. A more traditional plan with a higher premium and lower deductible might offer you improved cost savings.

How much does a high-deductible health plan cost?

On average, if you are a covered employee with a high-deductible health plan in the United States, you may pay $8,217 annually and $22,404 for a family.³ HDHPs have lower monthly premiums and are a good fit for those who anticipate needing preventive care only.

How do I choose a health insurance plan that’s right for me?

Consider the following when choosing a health plan:

• If you’re healthy and usually go to the doctor once a year, a lower monthly premium (like one that comes with HDHPs) may be a good choice for you.
• If a chronic health condition means that you go often to your primary care provider (PCP) or specialists during the plan year, you must decide if savings from low premiums are greater than the cost of regular care or medication.

Carefully weighing the pros and cons of high-deductible health insurance may help you find the coverage that’s right for you. In addition to saving you money, finding the right plan for you can help ensure that you’ll receive coverage for the health care you need, when you need it.

¹ Not all preventive care services may be covered. For example, immunizations for travel are generally not covered. See your plan documents for a complete list of covered preventive care services.

² HSA contributions and earnings are not subject to federal taxes and not subject to state taxes in most states. A few states do not allow pretax treatment of contributions or earnings. Contact a tax professional for details.

³ 2023 Employer Health Benefit Survey, KFF, October 18, 2023, www.kff.org/report-section/ehbs-2023-section-8-high-deductible-health-plans-with-savings-option