Money matters more than your health history.
It’s insurance time, aka the most frustrating time of the year. You may be shopping for it on your own or setting it up through your employer, and the premiums may be, well, frightening. If you’re young and relatively healthy, a high deductible health plan (HDHP) may sound appealing. These plans feature higher out of pocket costs before coverage kicks in—deductibles of at least $1,300 for an individual or $2,600 for families—but lower monthly premiums, so at the outset, they can look more affordable. Nearly 43 percent of people under age 65 with private health insurance are enrolled in an HDHP, up from 39.4 percent in 2016 and 25.3 percent in 2010, according to the latest data from the National Center for Health Statistics. If you barely go to the doctor anyway, you think, what’s the harm? I’ll be fine.
But you need to know what you’re getting into. While it may seem like the best choice for you, it also can be more expensive in the end. New research in JAMA Internal Medicine indicates that most people who sign up for HDHPs aren’t doing the things that would help them pay for or lower their medical costs, like saving for future health expenses, discussing the cost of treatment with their provider, or trying to negotiate lower prices.
“I don’t think many plans and employers have well-equipped consumers for using their HDHPs to get the care they need at the lowest possible cost,” says co-author Jeffrey Kullgren, assistant professor in the department of internal medicine at the University of Michigan Medical School and Institute for Healthcare Policy and Innovation.
One of the big problems researchers found: only 58 percent of the 1,637 people with HDHPs they surveyed had an account like a health savings account (HSA) to help them pay for services until they hit their deductible, and only 40 percent had put any money away. Contributions to an HSA are tax-deductible, you can take money out tax-free to pay for medical expenses, and the money rolls over into the next year and earns interest. Not only does an HSA help you set aside funds so you’re not saddled with a huge bill if you take trip to the ER or get a surprise surgery, but by not paying taxes on it, you save money, too.
Your HSA is key in ensuring that you can ultimately afford a HDHP. “Employers have been increasing deductibles for well over a decade. They’re continuously looking for ways to reduce the costs of benefits, and one such way is shifting costs to employees by increasing cost-sharing, including the deductible,” says Dania Palanker, assistant research professor in the Center on Health Insurance Reforms at Georgetown University. She adds that HDHPs offer savings for employers because employees end up paying for more of their health care, like doctor’s visits, prescription drugs, and blood tests.
When you enroll in a HDHP, it’s important to know which services count toward your deductible before your plan kicks in and starts to offer coverage. “The deductible in an HDHP applies to all services except for preventive services,” says Palanker.
But really get into the nitty gritty of what your plan offers—confirm that your plan or the one you’re considering is actually an HDHP. She notes that some plans aren’t technically HDHPs but still have what you’d consider a high deductible, and those will only apply to certain services, and may involve co-insurance (a percentage of the cost of a service) rather than a copay. You want to know exactly what you’re enrolled in so that you can appropriately plan for medical expenses; If the out-of-pocket costs still seem pretty high but if it’s not an HDHP, you can set money aside in what’s known as a flexible spending account (FSA).
If the plan you want (or the only one your employer offers, ugh) is a real HDHP with a deductible of at least $1,300, you really need to set up an HSA.
Seriously, you need an HSA
“HDHPs generally work best for people that can afford to put money into an HSA, even though they may appear attractive to people with fewer financial resources because of the lower premium,” Palanker says. “HDHPs are meant to work in conjunction with an HSA. Someone who cannot afford to put money into an HSA could face thousands of dollars in medical bills without the resources to pay for them,” she adds.
The rub is that high deductible plans aren’t required to be paired with these savings accounts, which is why you may not set one up or know you need to. When legislation created HSAs back in 2003, it was established that if you want an HSA, you need to have an HDHP; not the other way around, explains Kullgren. An HSA can seem optional unless your employer requires you to set one up in order to choose an HDHP or encourages you to create one by putting money into your account. That’s not the practice across the board. “Our research found that many people are going without a tax-advantage savings account to help them cushion the blow of their deductibles,” he says.
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If you’re shopping for your insurance on healthcare.gov (aka the Obamacare marketplace), Palanker notes that the premium subsidies from the government act like an employer contribution, so you’ll pay less for your coverage every month. There are four plan categories—bronze, silver, gold, platinum—with bronze plans usually having the lowest premiums and the highest out-of-pocket costs and platinum having the highest premiums and lowest out-of-pocket costs. If a bronze plan is available at no cost to you (a real possibility for 2018), it may be tempting to go for that plan, but realize that their deductibles can be into the thousands. But free might not even be your best option, Palanker says, “You may be eligible for special silver plans that have even lower cost-sharing than the gold plans. These plans can have much lower deductibles, copays, and other cost-sharing,” she says. “They’re designed to be affordable to use, even though they will have a premium associated with them.”
Whether or not you choose an HDHP is a personal decision based on the needs and resources of your family, Kullgren says. “In the early days of HDHPs, the people who chose them tended to be healthier and wealthier, but now more people who are not as healthy or wealthy have gone on these plans. There’s a broader swath of the population enrolled in these,” he says. “I don’t see anything on the horizon that will change in the future. That’s why we need to help people use these plans better.”
Whether you’re buying coverage through healthcare.gov or through an employer, you should still factor in the same info, says Palanker. Here are five ways to make sure you’re getting the most out of your plan:
Compare, compare, compare
Look at all your insurance options, including the premium, cost-sharing, provider networks, and what medications are covered (especially if you take certain meds every day) when shopping for a plan, Palanker advises. The deductible applies to providers in the plan’s network; there’s no limit for charges out of network; so if you couldn’t imagine seeing a different GP than you do now, make sure they accept that plan. Things change from year to year, so look it over even if an HDHP worked for you last year.
Do the math
Factor in the cost of the deductible when considering the monthly price of the plan. If you expect to meet the deductible because you have a chronic condition or need to get surgery (or whatever reason), Palanker recommends adding together the annual cost of premiums with the annual deductible to compare different plans. (You’d need to contribute the deductible divided by 12 to an HSA each month. If that no longer looks affordable, maybe an HDHP isn’t right for you.) If you don’t expect to meet the deductible, calculate if you can afford to meet it in case of an accident or illness, she says. Also, “look at whether or not the deductible counts towards the annual out-of-pocket maximum, which is the most you will pay for covered services during the plan year,” she says. The max can be as high as $6,500 for an individual or $13,100 for a family.
Think of your car insurance
Kullgren notes that we often choose a deductible in auto insurance based on what we can afford in the event of an accident. “Think about your health insurance deductible in the same way,” he says. Could you pay it with money you've got saved? If not, you need to put at least some money away in an HSA or you're going to take on debt.
Talk to your doctor
Unexpected stitches are one thing, but some medical treatments you can plan for. Kullgren recommends having a conversation with your doctor about what services you may need in the coming year. Perhaps you can also draw up a plan for how you can afford that. His research found that only 40 percent of people with HDHPs were putting aside money for future care (whether in an HSA or other account), only one-quarter of people were asking about the cost of services, and just six percent negotiated prices in advance or after getting a bill. For half of the people who took these initiatives, they benefitted by getting the service they needed or saving money.
Don’t be shy about your deductible
Tell your doctor exactly what it is. “Patients and providers can then make plans together for what services are and aren’t worth out-of-pocket spending. This can help you draw up personalized plans to get the care you need and be able to afford it,” says Kullgren.
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