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High Deductible Policies

Due to the high cost of health insurance premiums, consumers are considering high deductible policies, also referred to as consumer-directed health care, as a viable alternative to their health insurance needs. The deductible for these policies ranges from $1000 or more for an individual and $2000 or more for a family. Premiums are lower than traditional health insurance coverage due to the higher deductible. High deductible policies are typically used in combination with a health savings account to cover out-of-pocket expenses. The theory is that the consumer will invest the difference saved in premiums into a health savings account. The coverage begins after the deductible has been reached. Policies vary in the percentages required for co-payments after the deductible is met and also in the maximum out-of-pocket expenses. Some policies offer preventive services with no out-of-pocket expense to the consumer. High deductible policies are designed to put more responsibility for health care decisions on the consumers, make them more cost conscious about their health care, and protect them from catastrophic illness. It is also believed that as consumers demonstrate discernment and become more selective in the services they use, the health care industry will become more competitive for those services, thus providing access to more cheap health insurance.

Are high deductible policies a wise alternative for the consumer? The proponents for high deductible policies would answer yes and point out 5 key benefits of having these policies. First, high deductible policies have lower premiums than traditional policies. Second, the lower premiums will encourage those who are uninsured to purchase health coverage. Third, consumers will be more responsible and economical in their choice of routine medical care. Fourth, the consumer benefits from tax incentives by having a health savings account to cover out-of-pocket expenses due to the high deductible. Lastly, the insured is covered in the case of catastrophic medical costs.

Critics of high deductible policies would answer no and point out six key concerns with these policies.

  1. Most uninsured do not have the finances to cover the high deductible, especially, in the time of a crisis.

  2. Consumers, especially those with chronic conditions, will cut corners on their medical care (e.g., skipping recommended doctor visits, putting off routine medical tests, taking half of their drugs, not filling their prescriptions, etc.) adversely affecting their health.

  3. The paper work involved with high deductible plans for the consumer is more complicated than traditional plans.

  4. The overall consumer cost of premiums and out-of-pocket expenses can be greater than the traditional health insurance costs to the consumer.

  5. High deductible insurance policies only benefit the healthy and not the sickly.

  6. The information needed to make informed health care cost effective decisions is not easily accessible to the typical consumer.

Should the consumer purchase a high deductible policy? It would be prudent on the consumer's part to thoroughly investigate the following questions before making a decision: First, does your employer offer a high deductible policy? Your employer may cover part of your premium. Second, what will be your out-of-pocket medical costs associated with the policy? For example, what will be the cost of your medications? It is also important to remember that only qualified expenses can be applied towards your deductible. Third, can you afford the out-of-pocket medical costs? Fourth, what is covered in the policy? For example, is there a lifetime cap on benefits? Fifth, what pre-existing conditions are covered? Sixth, are preventive services covered? Seventh, what impact will going out of network have on your medical costs and deductible? Eighth, what is your family doctor's view of high deductible health insurance plans? Ninth, what paperwork (e.g., billing) and record keeping (e.g., health savings account) will be involved with the plan? With high deductible health insurance plans, more paperwork is sent directly to the consumer than traditional health plans. Tenth, have you shopped around and compared health insurance premiums and coverage of other policies?

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