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What is a High Deductible Healthcare Plan and is it Right for Your Family or Business?

High deductible healthcare plans, also known as HDHPs, is an official term defined by the IRS used to describe a very specific type of healthcare plan. Though the name may sound self-explanatory, there is more to it than just any healthcare plan that has a high deductible. There are several key standards that these plans have to follow in order to be considered HDHPs as well as certain situations in which they can affect other conditions of your healthcare. The team of insurance providers at Unity Insurance outline the basics of a high deductible healthcare plan and how they could affect other aspects of your healthcare conditions. 

Know the Basics: What Rules do HDHPs Have to Follow?

In order to be considered a high deductible healthcare plan, there are three rules that HDHPs must follow. Primarily, the deductible itself must meet a minimum amount, with this amount being established by the IRS each year. For 2021, the minimum deductible for an individual person is $1,400 and $2,800 for a family. Secondly, the out-of-pocket maximum for the deductible must not exceed a certain amount, also established by the IRS each year. These amounts for 2021 are $7,000 for an individual and $14,000 for a family, respectively. The third and final rule is that the HDHP cannot pay for any non-preventative services before the minimum deductible is met. This means that any healthcare services that are non-preventative, such as office visits or prescriptions, must be paid in full and will not be covered by the HDHP unless the minimum deductible amount is met. 

HDHPs Are Necessary to Contribute to a Health Savings Account (HSA)

Health savings accounts, also known as HSAs, can help individuals who have HDHPs cover their out-of-pocket expenses. Therefore, if you want to be able to contribute to your own HSA, you must already have coverage under a HDHP. In order to successfully contribute to a HSA, you must have an actual HDHP that follows the specific rules defined by the IRS, not just any other healthcare plan with a high deductible. Additionally, you must also not have any other healthcare coverage and cannot be claimed on another’s tax return as a dependent. By following these rules, along with having HDHP coverage, you will be able to successfully contribute to a health savings account. 

The Financial Benefits of HDHPs

HDHPs can bring you financial benefits by actually helping you save money. Over the years, deductibles on healthcare plans have increased, making the minimum deductibles on HDHPs really not so “high” anymore. This is especially true when comparing deductibles of non-HDHPs, as the numbers for deductibles in general has increased greatly. In fact, the average deductible on an employer-sponsored plan is now higher than the minimum deductible on an HDHP. In addition to now having relatively average deductibles, HDHPs may also have lower out-of-pocket maximums compared to other available healthcare plan options. When they were first introduced in 2004, HDHPs were seen as unique for having a set limit on out-of-pocket costs set by the IRS. However, in 2014, the Affordable Care Act set limits on out-of-pocket costs for all healthcare plans, unless they were grandfathered or grandmothered. Due to these many changes, one searching for healthcare plans could possibly find other plans that have higher out-of-pocket costs, countering the common belief that HDHPs are the lowest priced plans available. This truly makes deciding whether or not to have an HDHP somewhat complex, as there will always be a trade-off. This is where consulting with an insurance provider can provide you with some guidance and relief. Nonetheless, even though the name “high deductible healthcare plan” may seem intimidating, HDHPs can still serve as a great healthcare plan option and bring financial benefits. 

Consult with an Insurance Provider at Unity Insurance to Learn More 

When it comes to choosing the right healthcare plan for you and your family, it is important to take a look at your current financial situation as well as other aspects of your life. If you are young, healthy and do not require frequent medical care, an HDHP may make sense for you. However, if you are the parent of several young children who visit the doctor frequently, an HDHP may not be the smartest choice. Yes, HDHPs can save you money through lower premiums and the possible contributions to a HSA, but whether or not a HDHP will be beneficial to you and your family in the long run will depend on your specific life stage and current medical expenses. Consult with a knowledgeable and experienced insurance provider at Unity Insurance on whether or not a HDHP is the right healthcare plan for you and your family or your employees. To learn more about our services or to set up a consultation, contact us today