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What is a High Deductible Health Plan?

Tricia Christensen
By
Updated Mar 03, 2024
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A high deductible health plan, often called consumer driven insurance, is a health plan with lower premiums and a higher deductible for major care, like a hospitalization or surgery. At the same time someone enrolls in a high deductible plan, he or she may also need to enroll in a health savings account (HSA). Generally, the person may put up to the amount of the deductible from income into this account, and the money is not taxed. Deductibles vary from as low as 1000 US dollars (USD) for an individual, to several thousand USD for family or couple coverage.

Some high deductible plans allow one to open an HSA, and others require a person have an HSA. The money in the HSA may have to be spent by the end of the year, or in some cases, is rolled over into the next year of coverage. Additionally, some HSAs do not allow a person to roll over the money from year to year. If it doesn’t get spent it is lost. This is hardly an advantage. As long as the money is not accessed for anything other than health care costs, it is not taxable. However, should the money be accessed, which is not always allowed, a person would pay full taxes.

In the high deductible plan, routine coverage like preventative care, or even visits to the doctor for an illness are generally not a part of the deductible. People may pay a small co-payment or no co-payment for these types of care visits. Prescriptions may also be purchased at a discount without needing to pay the deductible first.

The logic behind the high deductible plan is that people may be able to save money in premiums. However, if an emergency arises, and people require more than basic care, they are likely to quickly lose savings from a lower premium, by paying out a large deductible. It’s difficult to predict sudden illnesses or emergencies, so it is something of a gamble on the part of the high deductible plan purchaser.

Further not all who enroll in a high deductible plan have an HSA. They may be unable to meet deductible debt, and may find their credit-worthiness quickly sinking if medical bills become difficult to pay. The high deductible plan with an HSA is usually the best bet, particularly if one is still earning income, and is relatively young.

Programs like Medicare now offer high deductible plan options, but some analysts believe these options are not great for those with smaller incomes. Some preliminary studies have found that some people go without needed care because they can’t pay the deductible, or even go without preventative care or medications because they can’t meet the co-payments.

The high deductible plan does protect the person with considerable assets. People who can open an HSA with the deductible protect themselves at a relatively low cost from very expensive medical treatments that might have them reaching into retirement funds or losing assets. A high deductible plan with a cap on spending may not be a good investment since three or four days in a hospital can quickly reach a low cap.

Often the high deductible plan works like an HMO or PPO in some respects, because it has a group of doctors one can see that will not incur higher co-payments. PPO plans are often better for some because they give a person access to a greater number of doctors. Yet doctors outside of the health plan’s network may cost more than a standard co-payment.

The Health Board is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Tricia Christensen
By Tricia Christensen
With a Literature degree from Sonoma State University and years of experience as a The Health Board contributor, Tricia Christensen is based in Northern California and brings a wealth of knowledge and passion to her writing. Her wide-ranging interests include reading, writing, medicine, art, film, history, politics, ethics, and religion, all of which she incorporates into her informative articles. Tricia is currently working on her first novel.
Discussion Comments
By anon112291 — On Sep 19, 2010

Actually, unused money in an HSA at the end of a plan year automatically rolls forward into the next year - there's no "use it or lose it" provision, and an HDHP may not impose one.

By anon50137 — On Oct 26, 2009

Best solution is to combine a high deductible health plan with aggregate wrap and an HSA. Maximize the cost savings with this combination and save the difference in claims.

By lanon — On Nov 05, 2008

HMO's have the benefits, however, I found two significant issues with HMO's. 1) when I hurt my Knee (ACL-blow out) I had to go through my primary physician first. Although this may not be a big deal to some, i found that it significantly slowed down my ability to receive proper care for my injury. With many issues, time is a concern, HMO's are super slow. 2) because HMO's are hard on the primary care doctor, many good primary care doctors refuse to join in the HMO. Within a two year period I had to change primary doctors 3 times. While this is acceptable to many I found that this constant change decreased the quality of my care.

By anon17758 — On Sep 06, 2008

As a 24 year old, is seems like it would be best to go with a healthcare plan with a high deductible. What would be the differences between HMO and PPO? From what I have gathered so far, HMOs sound like a better choice. Is this true? Thanks for your response.

Tricia Christensen
Tricia Christensen
With a Literature degree from Sonoma State University and years of experience as a The Health Board contributor, Tricia...
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