This benefits open-enrollment period, your employer may ask you—even force you—to enroll in a high-deductible health insurance plan with a health savings account. Nearly three-quarters of companies expect to offer this type of plan as an option for 2015, up from 63% in 2014. And 23% say it will be the only option, Towers Watson found.
While premiums on high-deductible health plans are typically 10% less than those of more traditional PPO plans, according to data from the Kaiser Family Foundation, co-insurance doesn’t kick in until you’ve paid much more out of pocket.
On average, you’ll foot the first $2,200 in costs as an individual, or $4,500 as a family. (Employers like the plans because they motivate you to be more discerning about your spending.) To pay the bills, you can save pretax dollars—up to $6,650 for a family—in a health savings account (HSA). Most companies throw in cash to sweeten the pot.
According to conventional wisdom, high-deductible plans save money for the young and healthy, who rarely see doctors. But with deductibles and premiums rising across all plans and more companies offering only this coverage, everybody needs to know how to best use high-deductible plans. “Whether we like it or not, higher levels of cost sharing is the way of the future,” says University of Michigan Medical School professor Dr. Jeffrey Kullgren. Here’s how to assess your options if you have options—and how to hedge your risk if you don’t:
If you have a choice of plans
Compare costs for a typical year. Your employer, hopefully, will make this easy for you: This fall, 76% of companies plan to offer tools to help employees assess plan options, says Towers Watson. Often these build in your current year’s usage of health services.
No such luck? Estimating your total costs under each plan isn’t easy, but it’s necessary to make the right choice. Start by reviewing your 2014 explanation of benefits statements—probably available on your insurer’s website—to see the insurer-negotiated prices for your usual services, says Paul Fronstin of the Employee Benefit Research Institute. Add the premiums to your expected out-of-pocket costs in each plan—up to and after deductibles—and subtract any employer HSA contribution for the high-deductible option.
Assess a worst-case scenario. In more than 58% of high-deductible plans, families could rack up bills exceeding their yearly HSA contribution limit, according to Kaiser data. In such cases, if you suffer a health crisis, “you’re at risk of using a lot of post-tax dollars,” says Katy Votava, founder of health insurance consulting firm Goodcare. “I like to see an out-of-pocket max that isn’t much more than the HSA limit.”
Gauge your cost tolerance. An American Medical Association study found that 43% of higher-income families in high-deductible plans had delayed or forgone care because of the cost. Almost a third of them reported greater stress, and 15% suffered a disability as a result of putting off care. If you’re likely to skip treatment to save a buck, this plan isn’t your best choice, particularly if you have a chronic condition.
If you go high-deductible
Budget for your costs. Set aside at least enough in the HSA—including employer contributions— to cover your expected care, and ideally more, says Kullgren. That way, “when you need care, you’re not faced with the decision to get the service or go without.” Rather than worrying about saving too much, think of this as a backup account for retirement: Leftover funds carry over year to year, growing tax-free, and can be withdrawn penalty-free for any purpose once you’re 65. (You will owe income taxes if the funds are used for anything but health costs.)
Be a savvy consumer. High-deductible plans put the onus on you to be price-conscious. Learn the costs of procedures in advance, and ask questions like “How will this test result affect what you do for me?” says Jacksonville financial planner and MD Carolyn McClanahan. Prices vary wildly, so comparison shop for services like blood tests and MRIs. It’s in your interest to get the best deal you can.
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