Q: What Is HDHP Insurance?
Asked by Anonymous on October 11, 2017
HDHP insurance or high-deductible health plans can be characterized by the following key features:
- Affordable monthly premiums;
- One (high) deductible, pre-determined by the IRS; and
- Annual exams + preventive care are covered.
Some HDHP insurance plans also provide access to health savings accounts (HSAs).
Like their name implies, consumers covered by HDHP insurance pay a smaller premium amount each month, but they must also pay thousands of dollars out-of-pocket before insurance begins to cover the cost of their medical expenses. While high-deductible health plans cost less than traditional insurance coverage on a monthly basis, HDHP insurance coverage can also be problematic if you get sick and need healthcare.
While high-deductible health plans can be considered as a type of “catastrophic coverage”, this type of plan comprises its own health insurance category. Additionally, the Internal Revenue Service (IRS) determines HDHP deductible thresholds and qualifying criteria (these guidelines change from year to year). For calendar year 2017, HDHPs plans must have a deductible of at least $1,300 for individuals and at least $2,600 for families. Of course, the deductibles may be larger – and often are.
HDHP Out-Of-Pocket Maximums
The IRS does provide some financial protection in the form of out-of-pocket maximums to people who are enrolled in HDHPs. In 2017, HDHP out-of-pocket maximums were set at $6,550 for individuals and $13,100 for families covered under the same plan. Slight adjustments to these limits are slated for 2018.
HDHP Coverage Details
HDHPs – like all plans under the ACA – are required to cover the cost of in-network preventive care, such as annual checkups, immunizations, and well-woman exams – whether or not the policyholder has met her plan’s annual deductible.
Some HDHPs may be compatible with a health savings account (HSA). HSAs allow those enrolled in high-deductible plans to use pre-tax dollars to pay for their medical and healthcare expenses. Money in an HSA belongs to the consumer and any funds left over at the end of the year carry over into the next year. Additionally, money in an HSA – and the interest earned on it – isn’t taxed.
HSA-Compatibility and HDHP Plans
- An HDHP does not guarantee that your employer offers an HSA, only that they can.
- Not all HDHPs are HSA-compatible. Being subject to a deductible over $1,300 does not make your plan HSA-compatible by default; HDHPs must be established as HSA-compatible by your insurance carrier.
- Money in an HSA continues to belong to you, even if you change jobs or retire.
HDHPs & Prescription Drug Coverage
HDHPs cover the cost of prescription drugs that are considered “preventative.” Drugs that aren’t considered preventative must be paid for in full if you have yet to fulfill your out-of-pocket deductible. In other words, drugs must be included under your HDHP provider’s list of approved medications to be covered in full and do not count toward your deductible; if you take a drug that is not on your insurer’s list, you’ll need to pay for your prescription medication out-of-pocket until you meet your plan deductible.
Note: whether or not a medication qualifies as “preventative” is determined by your insurance carrier, so a particular drug may be considered preventative under one plan and not by another. If you’re unsure whether a particular medication is considered preventative under your plan, call your insurance provider to ask.
The Bottom Line
The most important thing to remember with a HDHP is that every decision you make about your medical care counts. HDHPs require consumers to take ownership and initiative over their own care, so it’s crucial for consumers to know what is and isn’t covered under their plan. Many routine health services intended to keep you well (e.g. colonoscopies, mammograms, and vaccinations) are covered at 100 percent by HDHPs. Policyholders should have a comprehensive understanding of their HDHP coverage, so they know what’s free.
Taking the Next Steps
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