Often when people hear the words "high deductible," they're wary of having to make a huge payment up front, before insurance kicks in and helps pay expenses. Though high deductible health insurance plans are becoming the norm, employees often express concerns about using these plans themselves. If you're considering moving to a high deductible plan or have recently implemented one, here is some information that will help you acknowledge your employees' concerns about costs while pointing out the potential positives a high deductible health plan (HDHP) can deliver.
What Is a High Deductible Health Plan?
Before we talk about the good and bad, we should define what a high deductible health plan is. As its name implies, an HDHP is a medical insurance plan with a high deductible. Since we all may have different ideas of what we consider a high deductible, the federal government created a specific definition of what qualifies as an HDHP. For 2017, an official HDHP for one person must have a deductible of $1,300 or more, while a family plan must have a deductible of $2,600 or more. Though those deductibles are higher than many employees might prefer, the federal government also dictates out-of-pocket maximums that cap the damage. Somebody with an individual plan will pay no more than $6,550 out of pocket in 2017, and families will pay no more than $13,100 out of pocket in the unfortunate event that they have some major medical bills.
The reason the federal government dictates requirements for HDHPs is because they're often paired with a health savings account (HSA), a savings vehicle for health care expenses where the federal government allows us to stash money tax-free. The government requires plans offering HSAs to meet certain requirements, such as the specified deductible range.
Pros and Cons
There's good and bad to almost everything, and HDHPs are no exception. Here are some of the good and bad points of HDHPs and tips for discussing the plans with employees, who are bound to have questions.
We'll start with the obvious con: nobody wants to pay thousands toward a deductible before the insurance company starts covering bills. However, generally speaking, the higher the deductible, the lower the insurance premium for a given plan. Savings on premium can add up all around.
When employees voice questions or concerns about high deductible medical insurance, point out that an HDHP is similar to auto or homeowners insurance, which most of us have used for years. We pay small expenses here and there, and the insurance protects us from the larger bills.
Related reading: Explaining Out-of-Pocket Health Care Costs to Your Employees
The cost to insure employees, or insurance premium, as it's known, is about 22% less for an HDHP compared to a traditional, lower deductible insurance plan. As an employer, of course, those cost savings are welcome! However, employees can benefit too:
Employees responsible for paying a percentage of their total premium will pay less in employee contributions since the overall cost is lower.
Employees eligible for a health savings account can use those premium savings to start a fund that will grow tax-free year to year. This provides a safety net for future medical expenses.
Sometimes the biggest benefit to any health insurance plan is access to network savings. Just being part of a medical insurer's network can save a patient 50% on a medical bill! Like most major medical insurance plans, an HDHP enables policyholders to take advantage of these huge negotiated savings.
Many Preventive Services Not Subject to Deductible
One big concern employees often express is paying out of pocket (until their deductible is met) for immunizations and other routine care when using an HDHP. Good news: many preventive services, such as those recommended by the U.S. Preventive Services Task Force, are not subject to deductible and are available at little or no charge to consumers covered by an HDHP. Though specifics may depend on how a physician codes and bills for the visit, consumers with HDHPs usually can receive immunizations and screenings at no cost or a minimal office visit charge.
When considering what type of medical plan to offer your employees, there are a lot of opinions and information to take into account. A high deductible health plan can save substantial money on premium and is definitely worth considering. For additional tips on saving costs without reducing the level of your employee benefits, check out our ebook.