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High-Deductible Health Plans

 


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If you are among the growing number of individuals and families with a high deductible health plan (HDHP), managing your healthcare expenses may be a top priority. Increasingly common, HDHPs are characterized by lower premiums and higher deductibles. A deductible is a fixed dollar amount specified by the plan that insured individuals must pay out-of-pocket. Once the deductible has been reached, eligible healthcare expenses will be covered by the plan. In most cases, the deductible must be met each plan year, which is not necessarily the same as a “calendar” year.

If you are covered by a plan with a high deductible, in return for a lower premium, you will be responsible for most healthcare costs until you meet your deductible. While this may seem overwhelming, especially if you have many healthcare needs, there are options for managing and controlling your out-of-pocket healthcare costs under an HDHP.

How do you know if you have an HDHP?

An HDHP features a lower insurance premium and a higher deductible than those of traditional health plans. Though HDHPs are usually a type of Preferred Provider Organization (PPO) plan, they also could be a Health Maintenance Organization (HMO) or a Point of Service (POS) plan. If you are unsure of the type of plan you have, and/or the deductible amount for which you are responsible before coverage kicks in, consult your plan documents, or ask your employer or health plan representative. See Alphabet Soup of Plans for more information on different types of health plans.

Your Out-of-Pocket Responsibilities Under A High Deductible Health Plan

An HDHP typically does not cover services and prescription drugs until the deductible has been met. However, some high deductible plans may cover preventive services and programs, such as prenatal care, cancer screenings, and smoking cessation programs. In these cases, the deductible applies to services that are not considered preventive. After you meet your deductible, the plan coverage provisions determine how much you will be reimbursed. Remember, you may still be required to pay co-pays and/or co-insurance for medical services and prescription drugs covered by the plan. It is a good idea to ask your plan about which services may be covered, and what your out-of-pocket responsibilities will be – before and after you meet the deductible.

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Managing Expenses Under A High Deductible Health Plan

Health Savings Accounts and Health Reimbursement Arrangements

To offset HDHPs’ higher deductibles, most individuals enrolled in HDHPs are eligible to set up a tax-advantaged health savings account (HSA).  An HSA enables you to pay for eligible health expenses, including expenses before the deductible has been met, with tax-free dollars. Increasingly referred to as a consumer-driven health plan (CDHP), an HDHP coupled with an HSA can help you take control of your healthcare expenses and save for the future.

Individuals may contribute pre-tax earnings each year to their HSAs. Some employers help employees contribute to their HSAs on a regular basis through payroll deductions, and some may also elect to make contributions to employee HSAs to help them pay for healthcare expenses before they meet their deductibles.  Though contribution limits apply, individuals can save significant amounts to be used for healthcare costs through HSAs. Unlike flexible spending arrangements, individuals keep their HSAs even when they switch employers. And, any unused amounts in the account at the end of the year continue to accumulate on a tax-free basis to be used for future healthcare costs.

As an alternative to an HSA, some employers contribute to a health reimbursement arrangement (HRA), which employees can use to pay for healthcare expenses that are not reimbursed by the plan. Employees do not contribute to HRAs; any unused funds are forfeited at the end of the year. And under these arrangements, if you change jobs, you no longer have access to the HRA.

HDHPs coupled with an HSA or HRA are an effective way to manage healthcare costs. You can use tax-advantaged dollars to get the care you need, but any unused funds continue to grow tax-free until you need them. Then, once you satisfy your plan’s deductible, your insurance company will reimburse all or a portion of your healthcare costs based on the provisions of your plan. 
 
How Does Your Plan Know When You Have Met Your Deductible?
 
While you are responsible for paying for services before you reach your deductible (and your HSA or HRA may provide a debit card for this purpose) under an HDHP, you or your provider will submit claims as usual and they will be tracked towards your deductible. When you receive your explanation of benefits (EOB) from your plan, it will show that the expenses will not be reimbursed because you have not yet met your deductible. Once you have satisfied the deductible, the EOB will reflect reimbursement for covered expenses according to the terms of your plan.

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Know Before You Go

Under an HDHP, you are responsible for out-of-pocket healthcare costs until the deductible is met, so knowing the cost of a service or procedure in advance can help you better plan your healthcare expenses. Look up your anticipated out-of-pocket costs on the FH® Medical Cost Lookup; before you meet your deductible, the “estimated charge” amount is what will be most relevant to you.

Talk To Your Provider

In some cases, providers may be willing to negotiate their fees, or develop a payment schedule to enable you to pay for the service in installments over time. Ask your provider whether s/he would be willing to consider these options.

You also may want to ask your provider if there are less expensive alternatives to prescribed medications, such as a generic option, or a pill/injection that could be taken at home instead of in your physician’s office.

Prevention

Taking steps to prevent illness and disease is always a good idea and may also be helpful in managing — and possibly avoiding — higher costs of care. As recommended by your provider, go for preventive screenings and annual checkups, and adopt health-promoting behaviors, such as consuming a healthy diet and exercising. Preventive measures, as recommended by your provider, may help you avoid the need for costlier treatments in the future. Remember, some HDHPs cover preventive services and programs before you meet your deductible, so check with your plan to find out how these services are covered.

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Your Action Plan For Managing Costs In High Deductible Health Plans

If you are enrolled in an HDHP, following these tips may help you manage your healthcare costs:

  • Read your plan documents carefully. Contact your employer or plan with any questions you may have about your coverage.
  • If you do not already have one, ask your employer about enrolling in a health savings account (HSA), or a health reimbursement arrangement (HRA).  If you are eligible, but your employer doesn’t offer an HSA, you can open an account with a local bank (or online). See A New Look at Flexible Spending Accounts, which also includes information on HSAs.
  • If you have funds remaining in your HSA after meeting your deductible, you may continue to use the account for co-pays, co-insurance and other qualifying healthcare expenses. An HSA cannot be used to pay for insurance premiums. The IRS publishes a list of qualifying healthcare expenses under an HSA.
  • Always keep a record and copy of your healthcare receipts; this will help you keep track of your healthcare expenses, so that you know when you have met your deductible.
  • Know before you go: Find cost estimates for services and procedures you may need on the FH Medical Cost Lookup. Knowing how much you may be responsible for paying can help you plan your healthcare expenses accordingly.
  • Talk to your providers. They may be willing to negotiate fees, accept payments in installments, or prescribe less expensive medication or treatment options.
  • Go for your clinically-recommended screenings and annual checkups, and talk to your provider about ways in which you could improve your overall health through preventive measures. Remember, some HDHPs cover preventive services and programs before the deductible is met, so ask your plan representative about which of these may be covered.

 

And most importantly – remember that you are your own best advocate. Speaking up and asking questions up front will help you get the care you need and avoid confusion about your out-of-pocket healthcare costs.


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