Everything You Need to Know: What is Considered a High Deductible Health Plan?
If you are considering a high deductible health plan (HDHP) for your health insurance, it’s important to understand what makes a plan “high deductible”. As the name suggests, a high deductible health plan is a health insurance policy that requires you to pay a higher amount of out-of-pocket expenses before the insurance company starts covering the costs of your healthcare.
Here’s everything you need to know about high deductible health plans:
How High is High Deductible?
To be considered a high deductible health plan, the deductible needs to meet certain minimum and maximum limits set by the Internal Revenue Service (IRS) each year. For 2021, the minimum deductible for an HDHP is $1,400 for individuals and $2,800 for families.
The maximum out-of-pocket limit for HDHPs is $7,000 for individuals and $14,000 for families. Once you reach this limit, the insurance company will begin covering your healthcare expenses at 100%.
How Does HDHP Coverage Work?
With an HDHP, you pay the full cost of your healthcare expenses until you meet your deductible. After that, you typically pay a copayment or coinsurance for each service you receive until you reach your out-of-pocket limit.
However, there are some exceptions to this rule. HDHPs must provide certain preventive care services, such as annual check-ups and screenings, at no cost to you, even if you haven’t met your deductible yet.
HSAs and FSAs
One advantage of HDHPs is that they are eligible for health savings accounts (HSAs) and flexible spending accounts (FSAs). These are tax-advantaged accounts that allow you to save money for medical expenses. Contributions to an HSA are tax-deductible and any money left in the account at the end of the year rolls over to the next year.
Who Should Choose an HDHP?
An HDHP may be a good choice for individuals who are generally healthy and don’t expect to need a lot of healthcare services throughout the year. It can also be a good choice for those who want to save money on their premiums and are willing to take on more of the risk for their healthcare expenses.
However, if you have a chronic health condition or anticipate needing a lot of medical care, an HDHP may not be the best choice for you.
Conclusion
A high deductible health plan can offer cost savings for some individuals, but it’s important to understand the risks and benefits before choosing this type of plan. By considering your personal health needs and financial situation, you can determine whether an HDHP is the right choice for you.
