High Deductible Health Plans Explained

Clearing the confusion of High Deductible Health Plans

Scratching your head wondering what’s all the excitement about? Are you thinking, “a HIGH DEDUCTIBLE doesn’t sound good to me”.

Let me explain in plain English, why everyone from Al Hubbard (Director of the National Economic Council and Assistant to the President for Economic Policy) to your local tax accountant is drooling with dollar signs in their eyes.

Before you rush headstrong into you HR Department to sign your family up on the dotted line, let’s first understand WHAT it is and the pros and cons associated to a HDHP.

A High Deductible Health Plan, in layman terms is a medical coverage plan that pays for preventative care and catastrophic coverage, with a very high up-front deductible you pay before the plan picks up the rest of the costs (ranging anywhere from $1000 to $5000). Now at first blush, I know that seems like a lot of zeros out your pocket, but trust me, there really is a benefit. The HSA (Health Savings Account). In 2003, President Bush signed a Medicare bill into law, allowing people to save tax-free money into a designated account (HSA), as long as it was attached to a High Deductible Health Plan. It works like this; instead of the $50, $100 or $200 a month your currently paying for your traditional PPO or HMO coverage right now, you have that money deposited (before taxes, keep in mind) into an HSA. And while that money is growing, with interest, you visit the doctor for preventative care (annual physicals, well-baby check-ups, etc) for free. And of course, while it’s growing, if the doctor tells you need a prescription, you simply pay for it because that money is already there! And in just a few months, it’s possible that you’ve saved enough to cover that ominous HIGH DEDUCTIBLE anyway! Problem solved. So, you now have two benefits. First, because this money was socked away into your HSA before taxes were computed, your Net income is a little more. Second, the HSA account is allowed to accrue interest, so it begins compounding on itself, thus growing larger without you having to do extra work.

The High Deductible Health Plans also have another inherent advantage. Because many of us have made or continue to make poor health choices with the food and drink we consume or lack exercise, the HDHP encourages preventative maintenance rather than dealing with medical problems AFTER their reach critical status. And from a cost of care standpoint, health professionals universally agree that not only is treatment easier on the patient if caught early on, it also cheaper. And with rising health care cost and the aging Baby-Boomer generation moving into position of greater need, the High Deductible Health Plans available today make it possible to have the health you want in YOUR golden years.

So what does all this mean to you? As a consumer of health benefits, you’re already paying some if not all of the monthly premiums to be insured (and if you think the amount that’s deducted from your paycheck is the total cost Think again. The real premium is likely double or triple what you see taken out), but you’ll ultimately never get any of that money back. It’s simply paying for the privilege to be there, just in case. Why not look at using having YOUR money grow? Let it work for you.

I encourage you to look at some of the options available to you. There are many great providers that offer several flexible benefits, plus you gain insight into making a comparative decision. Personally, our family is currently using Humana, and to date we have not a single issue. Feel free to visit www.Humana.com, for a starting point. Current studies estimate more than 3 million Americans already have looked into the different options, and made the switch to High Deductible Health Plans.