Saving Money and Protecting Your Family

High Deductible Health Plans

An HDHP is not some new high definition computer screen. It’s a High Deductible Health Plan, and millions of people are saving money on their monthly health insurance premiums with these plans. If you think health insurance is too expensive for you, or you want to lower your monthly payments, you need to learn more about HDHPs. 

As the “high deductible” part of the name indicates, with an HDHP you chose to take the risk that you may need to pay out of your own pocket $1000, $2500 or more (you decide) in deductibles and co-payments before your insurance kicks-in, but in return your monthly premium payments can decrease $1000s per year.

High Deductible Health Plans, (sometimes called “Catastrophic Coverage”) put you to be in control of your smaller, routine medical payments (like annual doctor visits and prescription drugs), but provide you with $1 million, $3 million or more in coverage if you need it for hospital bills, surgery or other major medical events.

High Deductible Savings Examples

We recently ran a study of the premium savings for two similar health insurance plans, one with a $500 deductible and the other with a $2500 deductible. Both plans were offered by the same top-rated national insurance provider. The quoted premiums were for:

• a 28 year-old, non-smoking female,
• a non-smoking family of three (F-28, M-32, Kid-3), and
• a non-smoking family of five (F-28, M-32, Kids-3, 5, 7). 

The monthly and yearly savings were impressive:   

The insurance plans we compared were the:

• Golden Rule Copay 35 with a $500 deductible ($1,000 for family), a 20% coinsurance, and a $2,000 max out-of pocket per person; and
• Golden Rule Saver 80 with a $2,500 deductible ($5000 for family), a 20% coinsurance, and a $3000 max out-of-pocket per person. 

Both plans had $3 million in maximum coverage and were quoted for families living in Ft. Lauderdale, Florida. Golden Rule is an “A” rated company (by AM Best) owned by United Healthcare. 

What’s covered and what’s not?

With over $2,450 in annual savings for a single woman and over $9,200 annual savings for a family of five, it pays to take a closer look at High Deductible Health Plans.  Here is a sampling of what both plans cover and exclude:

For routine medical care such as doctor’s visits and prescription drugs you will pay a small copay ($35) with the $500 deductible plan, but will pay the entire costs of your care with a High Deductible plan. For more intensive medical care such as ER visits, hospitalization and surgery, both plans kick-in after the deductible is met ($500 or $2,500 per person – up to two deductibles per family), and then the plans pay 80% of the remaining costs.  Both have maximum out-of-pocket limits ($2,500 and $5,500, respectively for an individual).  Also, both plans offer a Maternity Rider, which is additional coverage to cover the cost of pre-natal care, childbirth and post-natal follow-ups. 

Click here if you have questions about these insurance terms or call for more information: 305-439-5559  

So what does this mean for you? 

Since you pay for all your routine medical bills with a High Deductible plan, we suggest that do some simple math before considering HD insurance for your family. For example, check the table below – how many times did you use the following health services last year and how much did you pay for each?

Remember, these services and average prices are meant to give you an example of what you may be forced to pay “out of your own pocket” with a High Deductible plan, and are not meant to provide you with information specific to you.  Everyone’s health needs are different, and prices for medical care and medication differ greatly based upon where you live and what you need. 

Given the assumptions made above, a single 28 year-old woman could save about $1,400 per year with a High Deductible plan over a standard $500 deductible plan (and probably more – remember, you still have copays with the low deductible plan, so your routine medical care is not free).

Your maximum exposure risk

Now let’s look at your maximum exposure risk – that is, the amount you may have to pay out of your own pocket in the case of an emergency.  Remember, a “deductible” is the amount of money you need to pay before your insurance pays the first dollar, and “co-insurance” is the amount you must pay after you have satisfied your deductible.  Co-insurance is usually stated as a percentage (20% in both the plans we’re reviewing), and has an out-of-pocket limit ($2,000 per person plus two deductibles per family per year for the low $500 deductible plan, and $3,000 per person plus two deductibles per year for the high $2,500 deductible plan).

Let’s take the case that someone in your family has a medical emergency that results in $5,000 in hospital expenses and a $10,000 surgery -- $15,000 in total expenses.  What are you responsible to pay?

These figures were calculated as follows:                

$500 deductible + coinsurance (20% of $14,500 = $2,900, capped at $2,000) = $2,500

$2500 deductible + coinsurance (20% of $12,500 = 2,500) = $5,000

So, with a High Deductible plan you may pay double for the same emergency medical care as compared with a $500 plan. This additional payment of $2,500 could, in the case of an individual insurance plan, wipe out any savings from lower premium payments. 

Is this right for you? 

As a healthy twenty or thirty-something year-old female, your odds are low of needing surgery, major hospitalization or other catastrophic care.  However, the reason you need insurance in the first place is for these times, and the more people you have in your family, the higher the chances of needing major medical care. 

You need to make this determination for yourself – if you had to come out-of-pocket $5,000 or even $10,000 in a year for additional medical care, would this place you in financial trouble?  If the answer is “it would hurt, but I could swing it if needed” then a High Deductible plan could work well for you.       

If you want more information or want to

see if an HDHP is within your budget,

 

Important Insurance Terms

• Premiums - The overall cost you must pay monthly or annually for your insurance policy.

• Deductibles - A dollar amount of health care expenses you must pay each year before the plan begins to pay for your care. You should choose a deductible you can afford to pay under your monthly or annual budget. Some plans, such as HMO or POS plans, may not require a deductible if you use in-network providers.

• Co-payment - A specific dollar amount that you pay each time you receive health
  services under a managed care plan.

• Co-insurance - The portion of covered health care expenses and any charges not covered by the plan that you must pay in addition to the deductible. In an indemnity plan, PPO, or the use of non-network services in POS plans, you usually pay co-insurance. This figure is usually expressed as a percentage. For example, the policy will pay 80 percent of the covered charges after you pay the deductible. You will be responsible for paying the remaining 20 percent.

• Out-of-Pocket Limit - It is the limit on the amount of money you will have to pay every year (including deductibles and co-payments) for eligible medical expenses every year. Once your share of medical expenses meet the out-of-pocket limit, the plan will pay 100 percent of your eligible medical costs for that year.

• Lifetime Maximum - The maximum amount of expenses that the plan will pay for
  medical care during your lifetime. If you expect to have significant medical expenses, make sure to check the plan's lifetime maximum.

• Exclusions & Limitations - Some services may not be covered or are limited by the
  health plan (such as cosmetic surgery, mental health, substance abuse, etc.). If you use a service that is not covered by the plan, you will be solely responsible for paying the full cost for care. Review the policy for limitations and exclusions.

• Maternity Rider - an add-on to your policy that covers certain expenses related to pre-natal care and child birth. There is usually a waiting period of 9 to 12 months before any benefits are payable.

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