When you look at health insurance policies, the deductible may not be the first thing you look at—but maybe it should be. The annual deductible is the amount you will have to pay out of your own pocket for the year before your insurer will start kicking in. As more people sign up for low premium-high deductible plans, it is increasingly important to look at how much you are responsible for before your insurance begins paying out.
If you are young and healthy, your annual deductible may not be a major issue since you probably won’t see a doctor often or encounter a major medical emergency that requires expensive care. However, if you are older or chronically ill, you probably want a health plan that offers as much coverage as possible. A low premium-high deductible plan may seem like a good deal initially, but once you start getting those medical bills, you will probably wish you had gone with a plan with a lower deductible.
This is troubling more Americans in recent years because more people are enrolling in low premium-high deductible plans through their employer or private insurers. In 2011, only 26.3 percent of Americans were enrolled in low premium-high deductible plan, but this grew to 39.3 percent in 2016. Furthermore, those on low premium-high deductible plans also had more difficulty paying off medical bills; 15.5 percent on high deductible health plans (HDHPs) had problems making payments compared to 10.2 percent on traditional health plans.
Why HDHPs Are Surging in Popularity
There are many reasons why high deductible health plans are becoming so popular, but ultimately, it boils down to cost. Almost half of all Americans get their health insurance through their employer who must subsidize a portion of those employee premiums. In recent years, as the cost of health care has grown, so too have insurance premiums. In 2018, the employee health care costs will rise 5 percent, saddling employers with $9,300 in premiums per worker.
This is an enormous financial burden on most companies, but it was especially onerous during the recent recession. Prior to the recession, only 4 percent of workers were enrolled in high deductible health plans, but this had grown to 39 percent by 2016. Companies saw HDHPs as a way to cut operating costs, but, unfortunately, it shifted more of the health care costs onto employees.
This transition to HDHPs in the business world was complemented by the rollout of the Affordable Care Act, popularly known as Obamacare. The ACA created private insurance exchanges in every state that allowed eligible applicants to enroll in subsidized health plans, helping insure millions of previously uninsured Americans. Although this did help many obtain health coverage, often the health plans that were available had high deductibles. In 2016, the average annual deductible for a bronze tier Obamacare plan was $5,700.
How Americans Are Responding
When initially presented to the public, high deductible health plans were intended to lower health care costs for everyone including insurers, providers and consumers. The high deductible was supposed to force consumers to make more informed choices after shopping around local providers. It was thought that if consumers had more “skin in the game,” that they would make smarter choices, and this would produce more healthy competition in the health care market.
This has not happened, however. Instead of doing more research into available health care options and choosing cheaper services, consumers have merely pared back how much care they get. One study found that people with high deductible health plans cut back up to 15 percent on medical services. This often resulted in foregoing preventive care and medications.
The underlying problem is that much of health care is too opaque for consumers to easily shop. Few providers publish their fee schedule to the public, and these figures are often not accurate for consumers with insurance. In fact, only 25 percent of people on HDHPs talked to a doctor or hospital about the cost of a service, and only 14 percent have compared prices among health care providers. Additionally, many consumers who need health care services only act in a time of crisis; these periods of high stress often force consumers to deprioritize cost considerations.
This is especially problematic for people with chronic illnesses like high blood pressure or diabetes. Without proper medical care, chronically ill people can eventually face life-threatening issues like heart attack or stroke. These major medical emergencies also pose a serious financial threat that can lead to long-term financial problems including diminished credit rating or bankruptcy.
How to Get The Most Out of A High Deductible Health Plan
If you are currently enrolled in a high deductible health plan, then you should understand your options. If you are relatively healthy, then you probably won’t want to change your plan, but you should know that you may have to pay hundreds or thousands of dollars out of your pocket if a major medical event does arise.
A smart way to prepare for this eventuality is to set up a health savings account or HSA. A health savings account allows you to save up to $4,450 for an individual or $7,900 for a family in pre-tax dollars. If you don’t use these funds, you can roll over the amount into next year.
Another good option is to start shopping around for better health care deals. You should start by asking your insurer who is offering smart deals—insurers want you to save money since they pay for a large part of medical expenses.
Finally, if you think your deductible is too high, you may want to consider a supplemental health insurance policy. For only a few dollars a month, you can enroll in a supplemental health insurance plan that may protect you from financial coverage gaps including copayments, coinsurance and annual deductibles.
If you would like to learn more about how to get the most out of your high deductible health plan, please visit Boost Health Insurance.