Why do employers like high-deductible health plans?
Asked by: Amanda Pollich Jr. | Last update: January 24, 2026Score: 4.2/5 (62 votes)
Why do employers prefer a high deductible health plan?
Employers save money on health insurance premiums and reduce their financial burden by opting for an HDHP. But as with individual consumers, these plans will provide the best value for your staff if they're generally in good health with no history of major illness.
What is the advantage of a high deductible health plan?
Savings tip: HDHPs have lower premiums. That means you pay less every month for your plan. Plus, you're covered for many preventive services and screenings at no cost without having to meet your deductible. When the plan year begins, you pay the full cost of your care until you reach a fixed dollar amount.
What is a downside of a HDHP?
Cons. Higher deductible: If your deductible is higher, it means you are required to pay for your medical care out of pocket up to that amount before your health plan begins to help pay for covered costs.
Why would someone want a high deductible but a lower premium?
If you go with a higher deductible, its deemed as paying later. This means you will pay lower monthly premium, and pay larger healthcare bills when care is consumed. If you dont anticipate using much healthcare, or only go for your wellness visits and a few sick visits, this is a great option.
When is a High Deductible Health Plan with an HSA a Good Choice?
Is it better to have a $500 deductible or $1000?
Remember that filing small claims may affect how much you have to pay for insurance later. Switching from a $500 deductible to a $1,000 deductible can save as much as 20 percent on the cost of your insurance premium payments.
Why is it not a great idea to have a high deductible?
Large medical expenses: Since HDHPs generally only cover preventive care, an accident or emergency could result in very high out-of-pocket costs. Future health risks: Because of the costs, you may refrain from visiting a physician, getting treatments, or purchasing prescriptions when they're not covered by your HDHP.
Who should avoid a high deductible health plan?
While these types of plans can be beneficial to those who are relatively healthy, they can be very expensive for those who have chronic conditions or who experience a medical crisis. It's important to carefully consider your expected medical expenses before choosing to participate in a high deductible health care plan.
Is it better to have HDHP or PPO?
HDHPs can be a good form of insurance for the young and healthy — especially if your employer offers you HSA contributions. But for anyone with significant medical expenses, an upcoming surgery, or a serious health condition, a PPO could be a better fit because of the lower deductible.
What is the upside to having a high deductible?
This means you'll pay less each month for insurance and more out-of-pocket when you receive care. The upside? Preventive care is still covered at 100 percent on these plans. Once you hit your deductible, your health plan will start to cover the cost of your other care.
Is $3,000 a high deductible for health insurance?
The higher the deductible, the more out-of-pocket costs you pay before your insurer begins covering medical expenses. The IRS defines high-deductible health plans for 2023 as: Individual plans with deductibles of at least $1,500. Family plans with deductibles of at least $3,000.
Why choose higher deductible?
But why would a plan with a high deductible be a good choice? If you're enrolled in a plan with a higher deductible, preventive care services (like annual checkups and screenings) are typically covered without you having to pay the deductible first. And a higher deductible also means you pay lower monthly premiums.
When should you consider a high deductible health plan?
If your in-network medical expenses would trigger the catastrophic limit, you may also want to consider an HDHP, if the nature of those expenses is such that you continue to pay out-of-pocket costs in your traditional plan even after you hit your traditional plan's lower catastrophic limit.
What are the main advantages of a high deductible health plan?
Advantages of an HDHP
Because the premiums are lower than other health insurance plans, the deductible is higher. However, many HDHPs provide 100% in-network coverage for preventive services before you meet your deductible. This includes services such as physicals and vaccinations.
Is $5000 a high deductible health plan?
For families, the deductible has to be at least $2,700, with a $13,500 max out-of-pocket. Many high deductible plans actually have a much higher deductible ($5,000-$7,000).
How much does a doctor visit cost with a high deductible health plan?
A rough guide is: New Patient Office Visit: $200 - $450 depending on how much time is spent on evaluation and/or how many medical conditions are addressed. Subsequent Office Visits: $75 - $300 depending on how much time is spent on evaluation and/or the number of medical conditions being addressed.
What is the downside to a PPO plan?
In general, PPO plans tend to be more expensive than an HMO plan. Your monthly premium will be higher and you will have to meet your deductible before your health insurer starts paying. You will also have to pay more out-of-pocket if you visit a provider who is not part of your PPO network.
Can you switch from HDHP to PPO?
Employees currently enrolled in the group medical plan who experience a HIPAA SER have the right to switch benefit plan options. For example, if an employee is enrolled in HDHP single coverage and gets married, they have the right to add the spouse and switch to a different medical plan option (such as to a PPO plan).
Do copays count towards deductible?
No. Copays and coinsurance don't count toward your deductible. Only the amount you pay for health care services (like the medical bill you receive) count toward your plan's deductible.
What is one disadvantage to a high-deductible health plan?
While High Deductible Health Plans (HDHPs) offer low monthly premiums, they come with several cons that individuals need to consider before enrolling. One major disadvantage is the high out-of-pocket expenses that a person may face before their coverage kicks in.
What is the 12 month rule for HSA?
It means you must remain eligible for the HSA until December 31 of the following year. The only exceptions are death or disability. If you violate the testing period requirement, your ineligible contributions become taxable income.
Who would be a good candidate for a high-deductible health plan?
An HDHP is best for younger, healthier people who don't expect to need health care coverage except in the face of a serious health emergency. Wealthy individuals and families who can afford to pay the high deductible out of pocket and want the benefits of an HSA may benefit from HDHPs.
Why are employers offering high deductible health plans?
Although a high deductible may sound like a bad thing, in some cases, it makes financial sense. By opting for a higher deductible, employees can secure lower monthly premiums. This makes coverage more affordable, and it can be particularly appealing to young workers who do not expect to have major health issues.
Is PPO ever better than HDHP?
In general, HDHPs are better suited for people who are young, single, healthy, or wealthy. PPO plans tend to be better options for people who are older, have a family, or have chronic medical conditions.
Why would someone choose a higher deductible?
Key takeaways. Low deductibles are best when an illness or injury requires extensive medical care. High-deductible plans offer more manageable premiums and access to HSAs. HSAs offer a trio of tax benefits and can be a source of retirement income.