If you’re healthy, or sick, and have some money saved or plan to save some in the coming year, you might want to consider a high-deductible health plan (HDHP).
When you’re healthy
If you’re in good health, rarely need prescription drugs, and don’t expect to incur significant medical expenses in the coming year, you might consider an HDHP. In trade for lower premiums, HDHPs require you meet your deductible before you get any coverage for treatment other than preventive care. That’s in line with the conventional wisdom that says “HDHPs and HSAs are for healthy people.”
When you’re really sick
But HDHPs and HSAs are also sometimes among the best options for people who have serious health conditions and know they’re going to need extensive medical care in the coming year. There are a couple of reasons for that: Maximum out-of-pocket costs combined with premiums, as well as the tax advantages that go along with contributing to an HSA. Let’s take a look at how each of those work when a person has very significant medical needs:
Premiums + maximum out-of-pocket might be lower with an HDHP
First, the maximum out-of-pocket costs on HDHPs are often lower than maximum out-of-pocket costs for non-HDHPs. In fact, the maximum allowable out-of-pocket exposure on an HDHP in 2021 is $7,000 for an individual and $14,000 for a family, whereas the maximum allowable out-of-pocket exposure on non-HDHPs is $8,550 for an individual and $17,100 for a family (that’s assuming the plans aren’t grandmothered or grandfathered – those plans don’t have restrictions on how high their out-of-pocket exposure can be, but all HDHPs have to follow the guidelines that the IRS sets for maximum out-of-pocket exposure, as those rules predate the ACA).
For 2022, the maximum allowable out-of-pocket exposure on an HDHP will be $7,050 for an individual and $14,100 for a family, whereas the maximum allowable out-of-pocket exposure for non-HDHPs will be $8,700 for an individual and $17,400 for a family.
But even when you’re looking at health plans with out-of-pocket caps well below the legal limits, it’s common to see HDHPs with lower out-of-pocket limits compared with other available plans. If your employer offers multiple options and one is an HDHP, take a careful look at the maximum out-of-pocket limits for the various plans. You might be surprised to see that even though the deductible is higher on the HDHP, the total out-of-pocket exposure might be lower. That’s not always the case, but you certainly don’t want to write off the HDHP without giving it careful consideration
