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High Deductible Health Insurance Plans: Risks and Benefits

In the light of an uncertain economy, more and more Americans are looking to save money and cut expenses wherever possible. One budget category that some people are trying to trim is health insurance. To do that, many are turning to different types of health insurance such as high deductible health plans for immediate savings. Others, however, are arguing against such plans. There are many dangers, these opponents say, that turn high deductible health plans into high risk health plans. What exactly are these high deductible plans and how serious are the risks?

 

Explanation and Benefits

Higher deductible health plans are health insurance plans that have a lower annual premium and higher out of pocket contribution. They require the patient to pay more before insurance coverage kicks in to cover medical costs. High deductible health plans currently have a minimum deductible of $1,150 for an individual and $2,000 for a family. The maximum out of pocket limit is $5,800 for an individual and $11,600 for a family (http://en.wikipedia.org/wiki/High_Deductible_Health_Plan). High deductible health plans are designed to be used with health savings accounts (HSA). This tax advantaged savings account will help the customer pay for the medical costs until the deductible is reached and the insurance coverage kicks in. These plans are best for healthy people who rarely need prescription medications. If a policyholder does not need significant hospital care, this health plan may be a viable option.

Warnings

Several concerns come up, however, in the discussion of high deductible health plans. Since these plans put a great deal of responsibility on the policyholder, these concerns should be carefully considered.

First, high deductible health plans can be quite expensive for some people. Factors like chronic illness, pre-existing conditions or likelihood of pregnancy significantly alter the cost of high deductible plans. Even if none of those things are true, here's how a high deductible health plan can become expensive very quickly. Most of the people drawn to this health insurance plan are people who are looking for savings because finances are tight. But with a higher deductible, those people will face significant immediate costs if they should need medical treatment. How many financially struggling families have $5000 sitting around waiting to be used for hospital bills? Often, the medical bills that come before the deductible is met can put a policyholder into a worse financial bind than the one he was trying to avoid. In some cases, it is necessary for high deductible health plan patients to pay co-insurance (10-20%) even after the deductible has been met, further increasing the debt-potential. One website reported that 49% of consumers with deductibles above $500 for a year ended up with medical debt.

Besides the financial risk that comes from normal use of a high deductible health plan, there are other costs hidden beneath the surface. Most high deductible plans have little or no drug coverage. Sometimes having high medical bills will cause your deductible to go up for the next year. It's possible that the medical bill itself will be higher for a high deductible policyholder since health care providers are often unable to give the same discount that they could give to an insurance company that's paying more of the costs as with a low-deductible health plan. And as could be expected, high deductible health plan costs are rising each year due to the rising cost of living.

Of course, there are also some dangers that don't have a dollars-and-cents price tagged immediately visible. Paying more of the medical costs on a high deductible health plan results in a good deal of paperwork hassle for the customer. Further, high deductible health plans often cause billing confusion and, in the long run, can result in higher administrative costs for health care providers. Perhaps most significant concern of all is the health danger posed to the policyholder. Because of the sizable initial cost to the patient, high deductible health plans often lead to avoidance of proper health care steps like check-ups and doctor visits.

Conclusion

High deductible health insurance plans offer significant savings on the surface for policyholders. They also, however, carry significant risk. For one of these plans to be of real value, it must be used with a well-kept health savings account by a healthy policyholder who is willing to take time to responsibly deal with both billing and his own health. For anyone else, high deductible health plans should be considered cautiously since the risks and dangers are significant.

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