A growing number of Americans are paying lower health insurance premiums in exchange for high deductibles, taking a gamble that saving money now won't put them in a tough financial situation if they're hit with high medical bills.
As we enter open enrollment season, it's important to at least consider these low-premium plans to determine if the increasingly popular risk is right for you.
High-deductible health plans are health insurance policies that require policyholders to spend a certain amount of money on their health care before coverage kicks in. For 2015, an individual plan with a deductible of at least $1,300 or a family policy with a deductible of at least $2,600 falls into this category. More benignly referred to as "consumer-directed health plans," they're attractive to employers and individuals alike because they come with lower premiums and reduce the use of health care services overall.
"Deductibles are a fairly new concept," says Sabrina Corlette, a senior research fellow with Georgetown University's Center on Health Insurance Reforms. Over time, "people realized it was a way to reduce the use of health care services. Because if people are required to pay for some of these costs up front, they are less likely to use nonessential services."
HDHPs Are on the Rise
To counteract the rising cost of health care in recent years, deductibles have grown in popularity and price tag. In 2014, 80 percent of insured workers had policies that included a deductible, according to the 2014 Employer Health Benefits Survey from the Kaiser Family Foundation Health Research & Educational Trust. The average annual deductible among employees has risen 47 percent since 2009, from $826 to $1,217.
Fortunately, provisions under the Affordable Care Act can help contain costs. In 2015, an individual will not pay more than $6,450 in out-of-pocket costs, and a family's out-of-pocket maximum is set at $12,900.
In the coming year, 81 percent of large employers are expected to offer at least one HDHP to employees, according to the National Business Group on Health. And many of these companies are only offering high-deductible options, leaving workers no choice in the matter. In 2015, 32 percent of employers plan to offer an HDHP as their only health insurance plan, up nearly 50 percent from 22 percent of employers in 2014.
"I was offered two high-deductible plans," says Stacy Grooms, a 31-year-old married mother of two in Iowa who took a new job in the spring of 2014. Her options included a $384 monthly premium with a $7,000 deductible, or a $300 premium with a $5,000 deductible. After meeting the deductible, the higher-cost plan paid 100 percent of covered costs and the lower paid 80 percent. "We chose the higher deductible because I was pregnant and would be delivering soon after getting coverage," she says. "We figured once the deductible was met with the birth and hospital stays, we would get a lot of other things taken care of."
These high-deductible plans aren't unique to employees, however, as the federal Marketplace and state exchanges offer similar low-premium, high-deductible coverage, particularly in bronze and silver level plans.
A recent survey from the Associated Press-NORC Center for Public Affairs Research found that more than half of Americans who are privately insured (that is, not through their employers) would opt to pay a higher premium, leading to lower out-of-pocket costs such as deductibles and copays. But 40 percent would prefer a lower monthly premium paired with higher out-of-pocket expenses. For them, HDHPs are an attractive choice.
An Array of High-Deductible Options
Like Grooms' options illustrate, consumer-directed health plans can vary considerably.
"That's something I think consumers need to think about -- that all high-deductible plans are not the same," says Katherine Hempstead, director of coverage for the Robert Wood Johnson Foundation. "A high-deductible plan can have many different manifestations depending on what is and what is not subject to the deductible."
In some states and under some plans, things such as drugs from the pharmacy or a certain number of primary physician visits may be covered with a copay rather than applied toward the deductible. For anyone choosing between HDHP options, whether through an employer or through an exchange, education and research are key.
"Many times, in the employer-sponsored context, you have very little choice and don't really study the plan design because your options are limited," Hempstead says. "But in the context of the exchange, whether it's private or public, theoretically, people really study the plan designs and need to understand and eventually use their plans a little better."
Is a High-Deductible Plan Right for You?
Choosing a health insurance plan involves some guesswork, primarily in estimating your health care expenses in the coming year. How often you see the doctor, whether you have ongoing prescription costs or frequently see specialists -- all of these are factors in determining how much coverage you'll need and how much you'll pay out-of-pocket.
"There are certain things people can predict," Corlette says -- for instance, if you have a chronic condition or an accident-prone child. "But the reason we buy health insurance is because there's a lot we can't predict."
Another consideration is your risk tolerance.
"High-deductible policies are inherently risky; they just are," Corlette says. If you don't have much cash, you may want to go with a lower deductible and higher premium. "If you're someone who has a lot of money tucked away in a money market, for example, maybe a higher deductible makes more sense because you can roll the dice with less risk."
The risks of high-deductible plans aren't only financial. One of the aspects of these plans -- discouraging unnecessary health care -- has a flip side: discouraging necessary health care.
Nearly 20 percent of privately insured individuals don't go to the doctor when they're sick because they worry about the cost, according to the AP-NORC Center poll. And despite preventive care being free and not subject to deductibles under the ACA, those with high-deductible plans are even more likely to worry about the costs as they make these important decisions.
A health savings account can cushion the blow by providing a method of saving pretax dollars to cover out-of-pocket expenses such as deductibles and copays. If your policy is a qualifying HDHP, you are allowed to open an HSA, and in many cases employers will also contribute to these accounts. Some employers use wellness programs to encourage healthier employees by offering HSA contributions or discounted premiums in exchange for logging regular exercise, joining a gym or undergoing regular health screenings.
Grooms took advantage of some of these, but found that not all of her family's visits were covered after meeting her deductible, something she is still trying to sort through. After her baby's birth, for instance, a lactation consultation in the pediatrician's office wasn't covered because Grooms, not her infant, was considered the patient and her policy doesn't cover adults receiving treatment in pediatric facilities.
Now she is temping at a new job, one that offers a low-deductible plan for full-time employees.
"I really hope I get hired on just for the benefits," she says. "It's $250 a month for a family, no deductible, $5 copays, zero out-of-pocket for generic prescriptions and $50 for ER visits. I think that says a lot about growing up when you're excited about a job because of the health insurance."