How To Navigate The Rise Of High-Deductible Health Plans

A guide to saving money if you have a high-deductible health plan

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Does it feel like you’re paying more for your healthcare than ever before?

You probably are.

That’s because the cost of healthcare has skyrocketed in the last two decades. And you’re likely shouldering more of that burden than you had previously.

In 2018 alone, the average patient’s share of healthcare costs rose 12 percent from the prior year.[1]

One contributor to these increased costs for patients is the Affordable Care Act.

Of those who switched from earlier health insurance plans to ACA-compliant policies, 39 percent said they paid more in monthly premiums. (On the other hand, 46 percent said they paid less.) [2]

Many companies are also choosing health insurance plans that shift these costs to employees for many reasons, including to reduce business costs.

That’s because companies often combine salary and benefits as one total employee cost. If health insurance costs for the company go up, companies make cuts somewhere.

To help reduce business costs, many companies are choosing health insurance plans that shift the burden of these costs to employees.

The bottom line: You’re probably ponying up a larger part of healthcare expenses than ever before. Whether you’re paying more through higher premiums, copays and deductibles, the cost of a doctor visit or simply paying for necessary medication.

The average patient’s out-of-pocket costs rose 12 percent in 2018.[2]

What are high-deductible health plans?

Before learning how high-deductible health plans work, let’s first clarify a few basic terms.

  • Deductible: A deductible is the amount you need to pay in healthcare expenses before your insurance company starts to help pay on those costs.
  • High-deductible health plan: A high-deductible health plan is a health insurance plan with a higher deductible than a traditional health insurance plan.
  • Premium: The monthly rate you pay for health insurance.

OK, now here’s why this matters.

The IRS defines a high-deductible plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. (Out-of-network services don’t even count as part of this limit, so consumers could end up paying even more than this out-of-pocket total.)[3]

In other words, you’re probably paying thousands in healthcare costs every year before getting much help from your insurance company.

Spoiler: You probably have an HDHP

There’s a pretty good chance you have one of these plans.

The rate of Americans covered by high-deductible insurance plans has experienced a huge spike in the last decade. In 2018, almost half the country (43.4 percent) had a high-deductible plan.[4]

As recently as 2006, that wasn’t the case.

Fourteen years ago, nearly half of all U.S. workers had a health insurance plan with no deductible at all. Your insurance at once covered your medical costs. And you paid, at most, a small percentage of your healthcare bills.

And yet, over the same time, insurance premiums also increased, rising at more than double the rate of inflation and outpacing wage gains.[5]

That’s quite a change — one you’re likely all too familiar with.

You might never reach your deductible

Some high-deductible health plan providers say these plans save healthy people money. After all, if you have a high-deductible plan, you likely pay a lower monthly rate, or premium, than you would with a traditional plan.

But that’s not exactly true for everyone, as the average annual premium contributions for family coverage increased 78 percent from 2006 to 2016.[6]

If you have a high-deductible plan, you’re also paying more for healthcare costs before reaching your deductible.

And guess what? Experts predict those deductible levels will keep rising, particularly for lower-paid employees.[7]

The high cost of high-deductibles

A recent nationwide poll by The Los Angeles Times and the nonprofit Kaiser Family Foundation found some concerning trends.[8]

While annual deductibles in employer-based health plans have nearly quadrupled over the last dozen years, Americans’ savings aren’t keeping up.

“One in six Americans who get insurance through their jobs say they’ve had to make ‘difficult sacrifices’ to pay for healthcare in the last year. That includes cutting back on food, moving in with friends or family or taking extra jobs,” the report notes. “And one in five say healthcare costs have eaten up all or most of their savings.”

While healthcare stakeholders work together to find solutions to the high-deductible problem, patients need their medicine now.

So why keep paying toward that high-deductible? Particularly if you can save money by ditching insurance at the pharmacy counter and paying without it?

Read on to see how skipping insurance can help you save money on prescriptions

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This article was last updated March 03, 2020