Daniel Stewart

Who Should Opt for a High Deductible Health Plan?

When shopping for healthcare coverage, the deductible amount is one of the factors most people prioritize. The deductible is how much you'll have to pay before your insurance takes over. While many consider a lower deductible the best option, that's not always the case.

A high-deductible health plan (HDHP) has its benefits. But who should consider getting one?

Healthy Individuals and Families

These plans may be better if you're in relatively good health. That's because they often come with lower premiums. While you can never predict the future, young and healthy people will likely use their insurance less. You might not need to pay for ongoing prescriptions or don't expect significant medical expenses. So why pay pricey premiums?

In this case, a high-deductible health plan can help you save in the short term.

Those Who Want to Open an HSA

One of the biggest benefits of an HDHP is that it qualifies you to open a health savings account. These accounts offer tripled tax advantages. You can contribute pre-tax dollars, defer taxes on any interest you gain through investments and make tax-free withdrawals for qualified medical expenses.

HSAs are a fantastic way to save for the future. While you must get a high-deductible health plan to contribute to an HSA, many consider it a better choice in the long term.

Those Requiring Significant Medical Care

While high-deductible health plans can benefit young and healthy people, it's also worth considering if you're ill and expect substantial medical costs. Why? It all comes down to the maximum out-of-pocket expense.

These plans typically have lower maximum out-of-pocket expenses compared to non-HDHPs. In 2023, the maximum is $7,500 for individuals and $15,000 for families. With non-HDHPs, you may pay a lot more. Plus, there are copays and coinsurance policies to consider.

A high-deductible health plan paired with a well-funded HSA can save you thousands. While the deductible is higher, you can use pre-tax dollars from your HSA to cover it and your maximum out-of-pocket costs. Then, insurance takes care of the rest.

Author Resource:-

Daniel Stewart has been helping people with their money management and personal finance with over 15 years' experience in business finance. You can find his thoughts at savings guide blog.