How do you feel about high deductible health plans (HDHPs) as compared to more traditional group health benefits? Does the thought of having to carry an HDHP scare you? If you are benefits broker, do you cringe at the thought of offering HDHPs to your clients? If you are HDHP averse, it is time to step back and take a second look. They are not so scary any more.
HDHPs have a bad reputation as being unfriendly to consumers. After all, a high deductible is always a bad thing, right? Wrong. There are very legitimate reasons to opt for a high deductible. And in many cases, those who choose to do so discover that they actually save money.
An Easy Definition
If you are not even sure what an HDHP is, think about how much you pay out-of-pocket whenever you need healthcare services. Your group insurance pays a portion of the bill while you cover the rest. Your plan’s deductible is the total amount you would spend out-of-pocket in a given year.
An HDHP requires more out-of-pocket payments in exchange for a lower annual premium. You are going to pay anyway, so the HDHP just lets you decide which end you want to pay on.
HDHP critics say the plans are bad for consumers because such plans cost too much in terms of out-of-pocket expenses. Critics also complain that employers do not contribute as much to HDHPs. But in the end, it all works out.
Premiums Keep Rising
The premise of this post is that HDHPs are not as scary as they once were. One of the big reasons for that is continuously rising insurance premiums. From 2001 to 2021, the average cost of a family plan more than tripled, climbing from about $7,000 to $22,000 annually. Increases have been so steep that some group health plans are now entering HDHP territory.
As long as consumers are paying that much for health insurance, they might just as well go straight for an HDHP and enjoy the benefits that come with it. HDHPs offer lower annual premiums. That translates into less money being taken out of an employee’s weekly paycheck. In addition, HDHP subscribers can also participate in health savings accounts (HSAs). This leads directly into the next point.
HSAs are gradually being improved to make them more attractive. As things currently stand though, HSAs are already pretty good. People with HDHPs can have money withdrawn from their paychecks and diverted to their HSAs instead. This ends up being tax-free money that can be used to cover a variety of healthcare expenses relating to treatments, medications, medical devices, and more.
The HSA gives consumers more control over their healthcare spend. It also motivates them to shop around rather than merely following referrals from their doctors. If they can get cheaper blood work done elsewhere for example, they have that option with an HSA.
Brokers Offering More HDHPs
The fact that brokers are offering HDHPs more often these days is yet another reason to not be scared of them. BenefitMall, a Dallas company that provides general agency services to brokers, explains that it is in the broker’s best interests to find each client the best health plan for its needs. More often these days, an HDHP represents the best available option.
HDHP critics have gone to great lengths to give the plans a bad name. They have attempted to scare consumers away from HDHPs. But there is no reason to be scared. HDHPs are a viable option well worth considering at a time when insurance premiums just keep going up.