A growing number of Americans are paying lower health insurance premiums in exchange for high deductibles, taking a gamble that saving money now won’t put them in a tough financial situation if they’re hit with high medical bills.
As we enter open enrollment season, it’s important to at least consider these low-premium plans to determine if the increasingly popular risk is right for you.
High-deductible health plans are health insurance policies that require policyholders to spend a certain amount of money on their health care before coverage kicks in. For 2015, an individual plan with a deductible of at least $1,300 or a family policy with a deductible of at least $2,600 falls into this category. More benignly referred to as “consumer-directed health plans,” they’re attractive to employers and individuals alike because they come with lower premiums and reduce the use of health care services overall.
“Deductibles are a fairly new concept,” says Sabrina Corlette, a senior research fellow with Georgetown University’s Center on Health Insurance Reforms. Over time, “people realized it was a way to reduce the use of health care services. Because if people are required to pay for some of these costs up front, they are less likely to use nonessential services.”
HDHPs Are on the Rise
To counteract the rising cost of health care in recent years, deductibles have grown in popularity and price tag. In 2014, 80 percent of insured workers had policies that included a deductible, according to the 2014 Employer Health Benefits Survey from the Kaiser Family Foundation Health Research & Educational Trust. The average annual deductible among employees has risen 47 percent since 2009, from $826 to $1,217.
Fortunately, provisions under the Affordable Care Act can help contain costs. In 2015, an individual will not pay more than $6,450 in out-of-pocket costs, and a family’s out-of-pocket maximum is set at $12,900.
In the coming year, 81 percent of large employers are expected to offer at least one HDHP to employees, according to the National Business Group on Health. And many of these companies are only offering high-deductible options, leaving workers no choice in the matter. In 2015, 32 percent of employers plan to offer an HDHP as their only health insurance plan, up nearly 50 percent from 22 percent of employers in 2014.
“I was offered two high-deductible plans,” says Stacy Grooms, a 31-year-old married mother of two in Iowa who took a new job in the spring of 2014. Her options included a $384 monthly premium with a $7,000 deductible, or a $300 premium with a $5,000 deductible. After meeting the deductible, the higher-cost plan paid 100 percent of covered costs and the lower paid 80 percent. “We chose the higher deductible because I was pregnant and would be delivering soon after getting coverage,” she says. “We figured once the deductible was met with the birth and hospital stays, we would get a lot of other things taken care of.”
These high-deductible plans aren’t unique to employees, however, as the federal Marketplace and state exchanges offer similar low-premium, high-deductible coverage, particularly in bronze and silver level plans.
A recent survey from the Associated Press-NORC Center for Public Affairs Research found that more than half of Americans who are privately insured (that is, not through their employers) would opt to pay a higher premium, leading to lower out-of-pocket costs such as deductibles and copays. But 40 percent would prefer a lower monthly premium paired with higher out-of-pocket expenses. For them, HDHPs are an attractive choice.