Do not Fear the High Deductible

I do not know know why it is, but many people tell me, “I do not want a high deductible.”

It could be that they are used to the old plans offered at work where the deductible was $500 and you paid $25 or less to see the doctor. The problem is that as the costs have been rising in the world of individual plans, they have also been rising in the workplace too. In order to save money on these plans for their employees, employers have also been raising the deductible in order to lower the cost of the plans. Employees are being asked (or not asked) to shoulder more risk.

Some, as they have seen the employers raise the deductible have sought my help to find a cheaper plan as an individual. Let me help you out. If your employer is paying for health insurance, they are paying at least 1/2 of the employee’s cost. As a single person, this means, you are not going to find a cheaper plan out there in the individual market unless you do choose a much higher deductible and maybe not even then. I would not recommend a higher deductible in that case.

However, if you are buying insurance as an individual, by all means consider the higher deductible plans because they will save you money. I recommend Health Savings Accounts (HSA) because you are allowed (isn’t our government gracious) to save money in that account to use for medical expenses. These plans are a Tax deduction for you. Unlike the FSA plans where you have to use the money each year, the HSA allows you to continue to accrue both deposits and interest for as long as you have a qualified plan. After that, the money is still yours but you should use it for medical costs to avoid penalties.

Most individuals do not use even $2,500 deductible every year. The savings in monthly costs from a $5,000 HSA plan and a regular PPO plan can be significant. That saved money can cover the costs, save on taxes and…if you do not use it, then be saved  for future time. You don’t need to stuff your HSA full of money each year, most people will be fine adding money until they reach $5,000-$10,000. Then you can stop the contributions and start again if you need to. The fact is you can plan on having a medical cost, just not predict WHEN the cost will come.

For families, especially large families, the HSA is almost the only way to go. They are FAMILY deductibles not individual deductibles. So if one accident meets that deductible, although it is true that you will pay the deductible, no one in the family will pay for any covered cost including Rx for the rest of the year!! It truly is a good deal in that respect.

The savings and paying in cash can help you negotiate with your doctors and dentists. Do not assume that just because insurance pays some of it, that you cannot request a lowered bill for a prompt payment. Worse case scenario on a $10,000 deductible that you take out of your HSA account is that you pay the $10,000! However, it is non taxed money, so you saved on taxes and most doctor’s if you ask will discount  so you save there too.

If you shop around, make sure that you include the HSA plan as part of your shopping experience, that way you can have confidence that you have it covered.