Daniel Stewart

Pros and Cons of Having an HDHP

A high-deductible health plan (HDHP) is one of many health coverage options. As the name implies, this option comes with a higher deductible. That means you'll pay more out-of-pocket costs before your coverage kicks in. While that might seem like a detractor, there are pros and cons to having an HDHP. Want to know the differences between HDHP vs PPO? Visit us now!

Read on to learn more and understand the difference between an HDHP vs PPO.

The Advantages of an HDHP

With a high deductible comes lower premiums. That's the biggest draw for most people interested in an HDHP. It's a popular choice among relatively healthy individuals who don't anticipate having high medical expenses for the year.

With an HDHP, you're paying less in premiums. That's a great perk for people who don't make much money and want to put their cash elsewhere.

Another benefit is that an HDHP qualifies you for a health savings account (HSA). An HSA is a triple tax-advantaged savings account that grows over time. You can put the money you save in premiums into your HSA, building a comfortable nest egg to cover qualified medical expenses. Many use their HSAs as a security blanket to cover the high deductible of their HDHP should they ever need it.

The Disadvantages of an HDHP

The most obvious downside of an HDHP is that you'll pay a lot more in out-of-pocket costs if you require medical care. This can be a huge financial blow if you don't have an HSA or other savings. It can be several thousands of dollars before your insurance coverage kicks in.

HDHPs sometimes also create a risk for further health problems in the future. Many people see the higher deductible and forgo simple checkups and doctor visits. That could result in missed diagnoses and unchecked medical issues.

HDHP vs PPO

A preferred provider organization (PPO) is a popular alternative to HDHPs. These plans are the opposite of an HDHP, providing lower deductibles with higher premiums. While you pay more yearly, the insurance coverage kicks in faster for fewer out-of-pocket costs. Furthermore, PPOs tend to be more flexible, offering a larger pool of providers and some out-of-network care.

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 HSA strategy blog.