Those familiar with insurance policies should be aware of deductibles in relation to the premium paid. Insurance companies focus on deductibles to calculate the premium payable on any policy. Those who choose a high deductible health plan usually have to pay a lower premium for their health insurance policy. A high deductible means a four-figure sum against which the policyholders can choose plans that provide full coverage for preventive care. It means that such health insurance plans relieve the policyholders from coinsurance and copays.
High Deductible Health Plan (HDHP) – An Explanation
Before understanding what is considered a high deductible health plan, it is essential to understand what a deductible is. For individual taxpayers or businesses, the deductible is an expense that qualifies for subtraction from adjusted gross income when calculating the tax during filling of a tax form. By taking advantage of deductibles, taxpayers can lower their tax liability due to the reduction of taxable income. It results in lower income taxes for businesses and individuals.
For an individual choosing a health insurance plan with a high deductible, it means that during a claim, the insured must pay their own share or out-of-pocket expenses first to activate the policy coverage. The insurance company is responsible for paying the balance amount as stipulated in the contract.
The Impact of HDHP on Policyholders and Insurance Companies
By choosing a high deductible, the insured person can lower the health insurance costs for two reasons. Firstly, because individuals must pay a considerable amount of money from their pocket, it makes them more health conscious and reduces the chances of frivolous claims. HDHP is beneficial for insurance companies, too, because fewer claims reduce cash outflow towards claim settlement. For individuals, the financial benefits reflect in high deductible health plan premiums are quite low because insurance companies charge less for policyholders who choose a high deductible.
HDHP is appropriate for healthy people seeking coverage for serious health problems. In addition, wealthy people who can afford the deductible stand to gain even more because of easy access to Health Savings Accounts accompanied by tax advantage.
How much is the Deductible Amount?
The services provided by the network providers of the insurance companies are subject to the limits applicable on out-of-pocket expenses. For example, the HDHP has a minimum deductive of $1,400 per individual and $2,800 for families. The maximum deductible varies from year to year, and for 2022 individuals can pay a maximum of $7,050, while for families, it is $ 14,100. In 2021, the limits were $7,000 and $14,000 for individuals and families.
The plan pays 100% for expenses incurred in-network care on reaching the limit.
Full Coverage for Routine Preventive Care
Policyholders of HDHP enjoy full coverage for preventive care without any coinsurance or copays. However, deductibles are applicable within the ambit of preventive care for some medical investigations like blood pressure screening, diet and nutritional counseling, depression screening, HIV screening, etc.
Knowing how a high deductible health plan works and how it impacts your healthcare costs should aid the selection.
