High Deductible Health Plans: What You Need To Know
The Challenges of High-Deductible Health Plans in the U.S.: What Consumers Need to Know
High-deductible health plans (HDHPs) have become increasingly common in the U.S., particularly among employer-sponsored health insurance options. While these plans often come with lower monthly premiums, they also require policyholders to pay a substantial amount out-of-pocket before their insurance coverage fully kicks in. This system creates financial and healthcare challenges, especially for individuals with chronic conditions and those facing unexpected medical emergencies.
How High-Deductible Health Plans Work
An HDHP is defined by the IRS as a plan with a minimum deductible of $1,600 for individuals and $3,200 for families in 2024, with maximum out-of-pocket limits reaching $8,050 for individuals and $16,100 for families. These plans often accompany Health Savings Accounts (HSAs), which allow pre-tax savings for medical expenses, but many Americans struggle to contribute enough to cover their yearly healthcare needs.
Under an HDHP, policyholders must pay their full medical costs—including doctor visits, prescriptions, and diagnostic tests—until they meet their deductible. After that, coinsurance kicks in, meaning they still owe a percentage of their healthcare expenses (typically 10-30%) until they reach their out-of-pocket maximum. This structure can lead to delayed or avoided medical care due to financial strain.
The Burden on Patients, Especially Those with Chronic Conditions
For individuals with chronic illnesses such as diabetes, heart disease, or asthma, HDHPs pose a significant challenge. Since they require frequent doctor visits, prescription refills, and ongoing treatments, these patients often hit their deductible early in the year. However, the upfront costs at the beginning of each year can be overwhelming, causing some to skip medications or postpone necessary treatments, ultimately worsening their health.
A study by the Kaiser Family Foundation found that nearly 50% of Americans with an HDHP delayed or skipped medical care due to cost concerns. This is particularly concerning for those managing conditions that require continuous monitoring.
Financial Risks and Hidden Costs
Even after reaching their deductible, many policyholders face additional financial burdens. Coinsurance costs can be unpredictable, and out-of-network care can lead to surprise medical bills, making cost management even more challenging. Additionally, patients often struggle with medical billing errors, which can inflate costs unnecessarily.
To navigate these financial risks, policyholders should:
Ensure their healthcare providers are in-network to avoid unexpected charges.
Review all medical bills for errors and contest any discrepancies.
Seek financial assistance programs such as those offered by hospitals, nonprofits, and advocacy groups like the Patient Advocate Foundation and Tennessee Health Advocates.
Strategies for Managing Costs Under an HDHP
To lessen the impact of high deductibles, patients can take proactive steps, including:
Maximizing HSA Contributions: HSAs offer a tax-advantaged way to save for medical expenses, but many people underfund these accounts. Contributing regularly can help manage unexpected costs.
Taking Advantage of Preventive Care: Most HDHPs cover preventive services—such as vaccinations, cancer screenings, and annual check-ups—at no cost before meeting the deductible. Scheduling these early in the year can provide vital health benefits.
Negotiating Medical Bills: Many healthcare providers offer payment plans or financial assistance programs, especially for those experiencing financial hardship.
What are good alternatives to High Deductible Health Plans? This depends on your age, household income, household size and many more factors. To view what options may be available to you click here.
Conclusion
While HDHPs can offer lower premiums and potential tax advantages, they also create significant financial challenges for many Americans. Understanding the details of how these plans work, staying informed about in-network providers, and utilizing HSAs and financial assistance programs can help mitigate some of the risks. For policymakers, addressing the burden of high deductibles remains a crucial issue in ensuring healthcare remains affordable and accessible for all.
Best Health Insurance Options for the Self-Employed
If you are a self employed and healthy individual, traditional, expensive insurance may not be the most cost effective insurance option for you. Most people want low deductibles and low max out of pockets on their insurance plan. At first glance, it seems like the best way to protect yourself. Although,
The best health insurance option for a self-employed individual is different case by case. Do you have any major medical conditions? Are you regularly seeing a specialist doctor? Are you taking a lot of prescription drugs? Questions like these and many more are important to ask to understand what plans make the most financial sense for you and your family.
Option 1:
Healthy With No Medical Conditions
If you are a self employed and healthy individual, traditional, expensive insurance may not be the most cost effective insurance option for you. Most people want low deductibles and low max out of pockets on their insurance plan. At first glance, it seems like the best way to protect yourself. Although, the less your deductible, max out of pocket and copays cost, the more you pay monthly. In the long run, you’ll pay more towards premiums than you will have saved on medical expenses.
If you’re healthy, you probably go to the doctor once a year for a checkup and aren’t taking any prescriptions. So why would you pay so much more monthly just to get your doctor and drug copays lower? On the other hand, you’re also paying higher prices for a lower out of pocket max incase of a hospital stay. Although, you will most likely still have to pay that max out of pocket after your hospital stay, which even with a good plan is usually $7,000 or more.
The best way to structure your health insurance as a healthy, self employed person, is to get a low-level major medical plan and strengthen the plan with supplemental insurance. These low-level plans are typically not the best option. On these plans, the copays, deductibles and max out of pockets are a little higher, but the monthly cost is much lower. Although, when combined with supplemental insurance, the supplemental will cover your financial responsibility incase of an emergency. The benefits of the supplemental insurance will pay you directly to level your out of pocket costs. Of course, this depends on what supplemental level of supplemental coverage you have. Supplemental coverage combined with a low level plan is a no brainer for healthy people.
Supplemental insurance comes in all different shapes and sizes, but the concept is all the same. If something happens to you that falls within the covered services, the supplemental insurance company will pay you directly. There is general hospital confinement coverage, which will pay you out for anything that keeps you confined to a hospital. It can be sickness, injury, anything. There is accident coverage, which will pay you out for any hospital stays or treatment related to physical injury. There is critical illness protection, heart attack protection, cancer protection and so much more. What you want is general hospital coverage that will cover your max out of pocket amount. This will cover your financial responsibility in the plan and likely be much cheaper than a traditional silver or gold policy. In the event that something does happen and you have a medical emergency, you are most likely going to spend less on medical expenses than you would with a silver or gold plan. And still be paying a lot less on monthly premiums.
Example:
Let’s say you end up in the hospital for 9 days.
Your Bronze major medical plan has a max out of pocket of $9,200
Your hospital confinement supplemental policy has $1,000 benefit for a 10 day benefit period.
On day 9 in the hospital, you’ve most likely already hit your max out of pocket with your major medical plan. You get out of the hospital and get a bill from your insurance. You owe them $9,200, your max out of pocket. Although, once you file a claim with your supplemental insurance, you receive $1,000 for each day in the hospital, you were there 9 days, so you receive $9,000. Once you pay the $9,000 towards your max out of pocket. Your hospital stay of 9 days only cost you $200.
To better understand supplemental health insurance and see how it may benefit you, visit
www.investopedia.com/what-is-supplemental-health-insurance-8656792
To build your own health insurance package, and structure benefits to your specific needs, Click “Compare My Options” Below.
Option 2:
Temporary or Seasonal Contractor
Short-Term Medical:
Short-term health insurance plans are a specialized product designed for temporary coverage, offering a cost-effective option for individuals in specific circumstances. However, their limited benefits and lack of consumer protections mean they are not suitable for everyone. Before enrolling in a short-term plan, individuals should carefully review their healthcare needs, evaluate the coverage details, and consider alternative options like ACA-compliant plans or Medicaid.
Understanding these principles ensures you make an informed decision about whether short-term health insurance is the right fit for your situation.
While short-term health insurance plans are not a one-size-fits-all solution, they can be beneficial for certain groups, including:
Healthy Individuals with Minimal Medical Needs: Those who rarely use healthcare services and want protection against unexpected emergencies.
Individuals in Transition: People between jobs or waiting for other insurance to begin may find these plans a useful temporary solution.
Cost-Conscious Shoppers: Those seeking a lower-cost option to cover major medical events during a brief coverage gap.
Pros of Short-Term Medical Insurance
Affordable Premiums
Short-term plans often have lower monthly premiums than ACA-compliant plans. This makes them an attractive option for individuals seeking temporary coverage without a high financial commitment.
Quick Enrollment Process
Applications are typically processed quickly, and coverage can often begin within days, making these plans ideal for urgent or immediate needs.
Flexibility
You can choose a coverage duration that fits your specific needs, ranging from one month to a year, depending on your state’s regulations.
These plans may provide basic coverage for major medical events, such as unexpected illnesses or injuries.
Availability
Short-term plans are widely available in many states, providing coverage options for those who do not qualify for ACA subsidies or are waiting for other insurance to start.
No Network Restrictions in Some Plans
Some short-term policies allow you to see any doctor or specialist, providing greater flexibility compared to ACA plans tied to specific provider networks.
Cons of Short-Term Medical Insurance
Limited Coverage
These plans are not required to cover essential health benefits mandated by the ACA, such as preventive care, maternity services, mental health treatment, and prescription drugs.
Coverage for pre-existing conditions is typically excluded, leaving gaps for individuals with ongoing health needs.
Medical Underwriting
Insurers can deny coverage or charge higher premiums based on age, gender, and health status. This practice is prohibited for ACA-compliant plans but is common with short-term policies.
Potential for High Out-of-Pocket Costs
Short-term plans often have higher deductibles and out-of-pocket maximums compared to ACA plans. These costs can add up quickly in the event of a significant medical need.
Limited Consumer Protections
Short-term plans do not include protections like guaranteed renewal or coverage for pre-existing conditions.
They may also impose caps on benefits, such as limiting the total amount paid for hospital stays or surgeries.
State Restrictions
In 14 states and the District of Columbia, the sale of short-term medical insurance is prohibited. Additionally, other states may impose strict regulations, such as limiting plan durations or prohibiting renewals.
Not a Long-Term Solution
These plans are intended as temporary coverage and are not suitable for individuals who need consistent, comprehensive health insurance.
Tax Penalties (in Some States)
While the federal individual mandate penalty was removed in 2019, some states still impose penalties for not having ACA-compliant insurance. Short-term plans do not qualify as minimum essential coverage.
Option 3:
Pre-Existing Conditions and High Plan Use
Health Insurance Marketplace:
As a self-employed individual with a pre-existing condition, a health insurance policy on the marketplace may be the right choice for you. If you are low to middle income you may receive a tax credit (discount) towards your policy. This will help you save on monthly premiums for your insurance. Although if you are self-employed and high income, you may not receive a tax credit towards your policy on the marketplace. A silver or gold marketplace plan might be the best option for someone who has a medical condition. These plans typically have lower copays for specialist doctor visits and lower out of pocket costs for prescriptions. The Affordable Care Act (ACA) was designed to make comprehensive health coverage accessible and equitable for all, particularly for individuals with pre-existing or major medical conditions. Here’s why an ACA plan is often the best choice for someone managing a significant health issue:
Guaranteed coverage for pre-existing conditions
No denials or exclusions:
Under the ACA, insurers cannot deny coverage, charge higher premiums, or exclude benefits due to pre-existing conditions. This ensures individuals with chronic illnesses, such as diabetes, cancer, or heart disease, have access to the care they need.Equal access to benefits:
ACA plans treat all applicants equally, regardless of their health history, providing peace of mind for those managing ongoing medical needs.2. Comprehensive benefits under essential health coverage
Essential health benefits (EHBs):
ACA-compliant plans are required to cover a set of essential health benefits, including:Hospitalization
Prescription medications
Mental health and substance use treatment
Preventive care and screenings
Rehabilitation services
Maternity and newborn care
These benefits are critical for individuals with major medical conditions who rely on consistent, specialized care.
Specialty care access:
Many major conditions require regular visits to specialists. ACA plans often include access to robust networks of providers to meet these needs.3. Financial protection
Out-of-pocket maximums:
ACA plans cap out-of-pocket expenses annually. Once this limit is reached, the plan covers 100% of eligible medical costs for the rest of the year. This prevents catastrophic financial loss for individuals requiring frequent or costly medical care.Subsidies and cost assistance:
Many individuals qualify for financial assistance, such as premium tax credits and cost-sharing reductions, making ACA plans more affordable than they may initially seem.4. Prescription drug coverage
Comprehensive formularies:
Most ACA plans include robust prescription drug benefits, ensuring individuals have access to necessary medications for managing chronic conditions.Plans often cover brand-name and specialty drugs required for complex health conditions.
Protections against price discrimination:
Unlike short-term health plans, ACA plans must adhere to rules that limit how much insurers can charge for prescription drugs.5. Consistent care across time
Year-round coverage:
ACA plans are designed for long-term use, ensuring continuous care without the need for frequent renewals or policy changes.No benefit caps:
Insurers cannot impose lifetime or annual limits on essential health benefits, guaranteeing individuals have consistent access to the care they need.6. Preventive care at no cost
Free preventive services:
ACA plans cover many preventive services without copays, such as screenings, vaccines, and wellness checkups. These services are critical for managing and detecting potential complications of major medical conditions early.7. Broad provider networks
Access to specialists:
ACA plans typically include large provider networks, ensuring individuals can access specialists and facilities that offer advanced treatments for complex conditions.Continuity of care:
A comprehensive network ensures patients can maintain relationships with their preferred doctors and specialists.
Why not short-term or limited coverage plans?
Short-term health insurance or non-ACA plans may seem attractive due to their lower premiums, but they fall short for individuals with major medical conditions because:
They often exclude pre-existing conditions.
They lack comprehensive benefits, such as prescription drug coverage or hospitalization.
They impose benefit caps and higher out-of-pocket costs
See www.healthcare.gov/blog/10-covered-marketplace-health-benefits/ for more details on covered services through marketplace plans.
To view Marketplace policies available in your area, Click “Marketplace Plans” Below.
What is the “Marketplace”?
The Marketplace, a breakdown. . .
The Federally Facilitated Marketplace is a centralized platform where individuals, families, and small businesses can compare and purchase health insurance plans. These plans meet specific standards for benefits, consumer protections, and costs.
Marketplace plans are divided into four categories: Bronze, Silver, Gold, and Platinum. These categories reflect the percentage of healthcare costs covered by the plan, with Bronze covering the least and Platinum covering the most. Generally, as you move from Bronze to Platinum, premiums increase while out-of-pocket costs decrease.
Who is eligible for marketplace coverage?
Anyone purchasing health insurance independently can enroll through the Marketplace. However, financial assistance is only available to those meeting specific income criteria who don’t qualify for affordable employer-based coverage or other government programs.
How does the subsidy and tax credit work?
U.S. citizens and lawfully present immigrants with qualifying household incomes may be eligible for subsidies to help pay for premiums. These include:
Premium Tax Credits: Lower monthly premium costs based on income and family size.
Cost-Sharing Reductions: Decrease out-of-pocket costs like deductibles and co-pays for eligible individuals.
Visit the Marketplace website to determine your eligibility for financial assistance.
The 10 Minimum Essentials Marketplace plans will cover
What Benefits Are Covered by Marketplace Plans?
All Marketplace plans cover a set of essential health benefits, including:
Doctor visits
Emergency and hospital care
Pregnancy and newborn care
Mental health and substance use services
Prescription drugs
Rehabilitative services
Laboratory tests
Preventive care
Chronic disease management
Pediatric services (including dental and vision care)
When selecting a plan, check if it covers necessary medications, treatments, and providers, and evaluate all costs, including deductibles and co-pays.
Can I Be Denied Coverage Because of a Pre-Existing Condition?
No. Under current laws, health insurance companies cannot deny coverage or charge higher premiums based on pre-existing conditions like diabetes. This applies to all major-medical plans sold within or outside the Marketplace.
Additionally, plans must cap out-of-pocket expenses and provide preventive services at no extra cost. While plans cannot set dollar limits on essential health benefits, they may impose other limits, such as the number of covered doctor visits or hospital days.
Do I Have to Have Health Insurance?
No, you don’t have to. Since 2014, most individuals are required to have health insurance. Marketplace plans, employer-provided insurance, Medicare, Medicaid, CHIP, TRICARE, and VA health programs all meet this requirement. Although, the federal government stopped imposing tax penalties for not having health insurance in 2019.
What Insurance Providers Offer Plans On The Marketplace?
There are a plethora of different providers available on the marketplace. The options you have to choose from depends on the state you live in. Some examples are: Aetna, Cigna, BlueCross BlueShield, Anthem, Ambetter, Oscar, Molina, Wellpoint, Health First, Christus, AmeriHealth and Baylor Scott & White. To see what options are available in your state, click the link below.