Making Sense of High and Low Deductible Health Plans

What’s the Difference Between High and Low Deductible Health Insurance? 

High deductible health plans (HDHPs) allow individuals to pay lower monthly premiums but require higher out-of-pocket costs, while low deductible health plans (LDHPs) have a higher premium but lower out-of-pocket expenses. Your premium costs are directly affected by your deductible, which is the amount you must pay toward your policy before your insurance starts covering healthcare expenses.

Many policyholders weigh high deductible vs. low deductible options when shopping for health insurance plans. Deductibles can cost $0-$15,000, depending on whether you need individual or family coverage and minimal or major medical care.

Why Does the Cost of Healthcare Continue To Increase? 

National health expenditures exceeded $4 trillion in 2021 and are expected to grow by 5% annually through 2030. The emergence of HDHPs and LDHPs is partly due to an aging population that requires more healthcare services and the high cost of treating chronic illnesses such as cancer, obesity, and heart disease. HDHPs may offer financial relief to policyholders who use their benefits for preventive health and wellness services.

High Deductible Healthcare Explained 

Several factors define an HDHP, including the following:

• HDHPs are plans with deductibles of at least $1,500 for individuals or $3,000 for families 
• High deductible health plans benefits offer preventive and wellness services, including tests, screenings, and annual well-patient exams 
• The high deductible allows for lower monthly premiums and copays for routine care 
• Additional advantages include eligibility for Healthcare Savings Accounts (HSAs) and out-of-pocket maximums
• Plan prices vary by insurer and a policyholder’s age, location, and tobacco use 

Eligibility 

• Applicants may not hold other non-HDHP coverage that could pay for out-of-pocket costs before they meet their deductible
• You can obtain an HDHP from a private insurer or through the Healthcare Marketplace
• Policyholders who are not covered by another non-HDHP policy are eligible to add their spouse and/or dependent to their plan

Pros and Cons of High Deductible Healthcare 

Pros of HDHPs

• Lower monthly premiums: High deductible plans require lower monthly premiums, ideal for people looking to save money over the long term on this regular expense
• Preventive care benefits: High deductible plans suit policyholders who primarily need preventative care, with many offering 100% coverage for in-network wellness visits
• Eligible for HSAs: Many HDHPs include HSA options, which allow policyholders to collect tax-free funds to help pay for out-of-pocket expenses

Cons of HDHPs

• More out-of-pocket costs: Policyholders must pay for their own medical care (usually except for preventive care) until they reach the high deductible of their HDHP 
• Major medical expenses are not covered: Until you meet your deductible, you are unprotected from an unexpected medical emergency or treatment for a chronic condition

Low Deductible Healthcare Explained 

There are several factors that define an LDHP, including the following:

• LDHPs are plans with deductibles under $1,500 for individuals or $3,000 for families 
• Low deductible health plan benefits kick in faster (once the deductible is met) for treating chronic conditions, frequent healthcare needs, and emergency services
• The low deductible requires higher monthly premiums and may not offer copays 
• Additional advantages include comprehensive care for families and low-income subsidies in the Healthcare Marketplace
• Plan prices vary by insurer and a policyholder’s age, location, and tobacco use 

Eligibility 

• Applicants may not be eligible for an LDHP if they hold other federal-, state-, or employer-sponsored coverage 
• You can obtain an LDHP from a private insurer or through the Healthcare Marketplace
• Policyholders may be eligible to add their spouse and/or dependents to their plan

Pros and Cons of Low Deductible Healthcare 

Pros of LDHPs

• Meet your deductible faster: Low deductible plans allow you to meet your minimum faster so your insurance can start paying for your medical expenses
• Comprehensive benefits: This plan suits policyholders who plan to use their benefits frequently for care, including prenatal services, chronic conditions, or a major surgery. 
• Ideal for families: Policyholders with multiple dependents can use frequent, comprehensive benefits for their whole family through an LDHP

Cons of LDHPs

• Higher monthly premium: Policyholders must pay more in premium costs each month in order to maintain coverage, which is especially costly for infrequent preventive care 
• Ineligibility for HSAs: LDHPs may not offer the same convenient copays for routine services as HDHPs and do not include HSAs to help with initial out-of-pocket costs

Compared: High Deductible vs. Low Deductible Plans 

	HDHP	LDHP
Average Monthly Premium (Single)	$300+	$500+
Average Monthly Premium (Family)	$500+	$1,400
Average Deductible (Single)	$1,500+	Less than $1,500
Average Deductible (Family)	$3,000+	Less than $3,000
Out-of-Pocket Max (Single)	$7,500	N/A
Out-of-Pocket Max (Family)	$15,000	N/A
HSA	Yes	No
Average Copay	Higher than LDHP	Lower than HDHP
Average Coinsurance	20%	30%-40%
Preventative Care	Yes	Limited
Vision and Dental	Through healthcare savings account	Through healthcare savings account
Available Through Employment	Yes	Yes
Available Through The Marketplace	Yes	Yes

HDHP vs. LDHP: Deductible Amounts 

Deductible amounts obviously factor prominently into comparing HDHPs and LDHPs. Deciding between a high or low deductible affects the kind of medical care you will receive and how soon your insurance will start covering your medical expenses. Generally, the higher the deductible, the lower the monthly premiums for that plan.   

High vs. low deductible plans also vary for single policyholders and families. High deductible plans suit individuals or families expecting little-to-no medical expenses, which means they can save money on monthly premiums and use HSA funds to help with out-of-pocket costs. For individuals and families that can afford to spend more on monthly premiums, LDHPs offer lower out-of-pocket costs and expanded benefits for frequent visits and chronic conditions.

HDHP vs. LDHP: Out-of-Pocket Costs

Out-of-pocket expenses also contribute to the vast differences between HDHPs and LDHPs. Depending on their deductible amount, policyholders may hardly use their benefits or spend thousands toward reaching their annual deductible. High deductible plans often include HSAs or HRAs to help with out-of-pocket costs. 

Plans may require a copay, or flat rate for a particular medical service such as a doctor visit or prescription. Many high deductible plans offer preventive care for a $0 copay or a low set fee. LDHPs may not include the same generous copays but offer coinsurance, which allows policyholders to pay a small percentage of their health care costs after they meet their deductible. 

Policyholders may still need to pay out-of-pocket for services ineligible for copays or before they meet their deductible for coinsurance to kick in. HDHPs typically include an annual out-of-pocket maximum to protect policyholders from overspending before they receive benefits and also include HSAs, which can help pay for out-of-pocket expenses such as vision and dental care. Most LDHPs do not qualify for HSAs.

HDHP vs. LDHP: Health Funds 

A health fund in the form of an HSA, flexible savings account (FSA), or health reimbursement arrangement (HRA) helps policyholders pay out-of-pocket expenses toward meeting their deductible. Since LDHPs require lower costs and a shorter time until insurance starts paying for medical care, they do not typically qualify for health fund assistance like most HDHPs.

Health Savings Accounts (HSA) 

HSAs are investment accounts used for healthcare expenses, available with most HDHPs. HSAs allow policyholders to add tax-free funds of up to $3,850 for an individual or $7,750 for a family each year, with rollover options every 12 months. HSA funds apply to deductibles, copays, and coinsurance but typically may not be used to pay monthly premiums.

Flexible Savings Accounts (FSA) 

FSAs are healthcare savings accounts for employer-sponsored HDHPs. During open enrollment, employees can elect funds from their paycheck to be deposited into a healthcare FSA, a limited expense healthcare FSA, or a dependent care FSA, at set times throughout the year. Employees who enroll in an FSA may not also enroll in an HSA. These pre-tax funds can go toward select medical expenses, except premiums, during only the current calendar year.  

Health Reimbursement Accounts (HRA) 

HRAs are healthcare savings funds for employees with HDHPs, managed by employers. Unlike HSAs and FSAs, employers make contributions to HRAs and control how and when the funds are distributed. Employees do not owe any taxes on contributions to their HRA. Employers may choose whether to let HRA funds roll over from one year to the next.

Choosing Between Low and High Deductible Health Plants 

Comparing high deductible vs. low deductible plans requires some heavy insight. Consider your financial budget and medical needs to decide which plan works for you and your family.

Consider a High Deductible Plan If… 

• You are young and healthy
• You seek individual coverage and/or have no dependents
• You rarely need prescription drugs
• You do not require ongoing treatment for a chronic condition
• You plan to use your benefits primarily for preventive care
• You do not anticipate any major medical expenses in the near future
• You prefer a low monthly premium payment
• You want to enroll in a healthcare savings fund to offset out-of-pocket expenses

Consider a Low Deductible Plan If… 

• You are a senior or are <a class=”wpil_keyword_link” href=”https://www.nashp.org/eligibility-levels-for-coverage-of-pregnant (or plan to become pregnant)
• You seek coverage for your family or multiple dependents
• You take prescription medication regularly
• You have a chronic condition or sustained illness
• You plan to use your benefits often and for specialized care
• You expect to accrue major medical expenses at least over the next year
• You can afford a higher monthly premium payment
• You can afford to pay out of pocket for a short period before your plan takes over 

Alternatives to HDHPs and LDHPs 

While HDHPs and LDHPs cover a variety of benefits and affordability concerns, there are other options to consider. The following are some of the more common alternatives to ACA or employer-sponsored high or low deductible plans.    

Medicaid 

Medicaid is healthcare provided jointly by states and the federal government. Medicaid offers free or low-cost benefits to low-income individuals and their families, elderly adults, pregnant women, and people with disabilities. Applicants may automatically become eligible for Medicaid in their state if they are a resident and qualify as low-income. Medicaid guarantees coverage for eligible individuals and costs less than even the lowest HDHP premium rates.

Medicare 

Medicare provides federally-funded healthcare to people 65 and older, some younger people with disabilities, and people with end-stage renal disease and ALS. People who qualify for Medicare can often waive their Part A premiums and pay a set Part B monthly premium ($165 in 2023) to get coverage. For those who are eligible, Medicare costs tend to be lower than an HDHP or LDHP.

Preferred Provider Organization (PPO) Plans

PPO plans offer a network of healthcare providers and give you the flexibility to see specialists without a referral. While they have higher premiums compared to HDHPs, they offer more extensive coverage and lower out-of-network costs.

Exclusive Provider Organization (EPO) Plans

EPO plans are similar to PPOs but do not cover out-of-network care, except in emergencies. They often have lower premiums than PPOs and can be a cost-effective option if you’re willing to stay within the plan’s network.

Point of Service (POS) Plans

POS plans combine elements of HMO and PPO plans. You choose a primary care provider, like an HMO, but can also seek care outside the network by paying higher out-of-pocket costs, similar to a PPO.

Putting It All Together 

HDHPs and LDHPs can offer a variety of affordable options with coverage for a wide range of medical expenses. When choosing a plan, it’s important to consider affordability, what type of benefits you need, and how often you need medical care. 

HDHPs often include low monthly premiums and perks such as HSA eligibility and caps on out-of-pocket costs, while LDHPs require higher monthly premiums in exchange for covering families and treatment for chronic conditions. Policyholders may enroll in an HDHP or LDHP through the Healthcare Marketplace or their employer, if available.