What Is A High Deductible Health Insurance Plan?

Updated on April 16, 2020
Rock_nj profile image

I enjoy writing about many topics, including healthcare and advances in healthcare, as well as herbal and natural healthcare approaches.

High Deductible Health Insurance Plans

If you have not heard of High Deductible Health Insurance Plans, you most likely will hear about them soon via your employer and will no longer be wondering what they are. The Affordable Care Act, which was passed by Congress and signed into law by the President of the United States in March 2010, has many beneficial aspects for people currently with and without health insurance coverage, such as insurance coverage for pre-existing conditions. However, government actions in the healthcare sector rarely occur without consequences both intended and unintended in the private sector; one of which has been the increased use of High Deductible Health Insurance Plans to provide employee healthcare benefits, as employers grapple with rising healthcare premiums.

High Deductible Health Insurance Plans

Employers Are Increasingly Turning To High Deductible Health Insurance Plans To Save Money
Employers Are Increasingly Turning To High Deductible Health Insurance Plans To Save Money

High Deductible Health Insurance & The Affordable Care Act of 2010

The Affordable Care Act has many intentions, the primary ones being: ensuring that tens of millions of additional Americans are covered by health insurance, ensuring that people are not denied coverage for pre-existing conditions, and reducing the cost of healthcare. While all of these are laudable healthcare goals, as are the many others that I do not have time to mention, the first two primary goals appear to be in direct conflict with the third goal.

How can coverage be extended to tens of millions of additional Americans and denial of coverage for pre-existing conditions be outlawed while at the same time reducing the cost of healthcare? Somewhere something has to give to make these healthcare reforms work. It appears that the increased mandates on insurance companies and their drive for profits are causing them to raise their medical insurance premiums. For many employers, the answer to rising health care premiums has been to offer or switch their employees to a High Deductible Health Insurance Plan to save on rising healthcare premiums.

A High Deductible Health Insurance Plan (HDHP) is a health insurance plan that has a high deductible that must be offered prior to offering traditional health insurance coverage. The high deductible can range anywhere from $1,200 to $10,000 or more, while the savings in healthcare premiums range from 20% to 50% or more. Such a plan essentially provides catastrophic medical insurance coverage that covers an individual or a family in the event that a major injury or illness occurs, for a lower cost of coverage.

The concept behind this type of insurance plan is to have the healthcare consumer more engaged in the process of choosing when and how to seek medical assistance, since they have a greater financial stake in paying for healthcare. Ideally, this leads to more prudent decisions regarding when and how to seek medical assistance, leading to cost savings for the healthcare plan, and the employer and employee who pay the medical insurance premiums. For example, if one knows that an urgent care medical clinic will cost them a fraction of what it will cost them to visit a hospital emergency room, they are far more likely to choose the less expensive option, if they are paying for the visit due to their annual deductible has not yet been met.

While the cost savings associated with a High Deductible Health Insurance Plan can be measured by the lower premiums paid and via studies that have demonstrated that when people have a financial stake in their healthcare they tend to spend less, these plans do raise the obvious question regarding whether they discourage those covered in the plans from seeking medical attention for preventative care and necessary medical treatment.

A RAND Corporation study published in the March 2011 edition of the American Journal of Managed Care found that while High Deductible Health Insurance Plans did in fact reduce costs for the administrator of the plan, as those covered sought less medical care, it also found that reductions in the use of preventive care by those covered under such health insurance plans, and that the plans could be causing people to reduce their medical spending on both necessary and unnecessary medical care.

"We discovered that costs go down dramatically during the first year people are enrolled in high-deductible health plans, as long as the deductible is at least $1,000 per person," said Amelia M. Haviland, a study co-author and a statistician at RAND, a nonprofit research organization. "But we also found concerning reductions in use of preventive care. This suggests people are cutting both necessary and unnecessary care." Source: http://www.rand.org/news/press/2011/03/25.html

Some employers soften the blow for employees in High Deductible Health Insurance Plans by offering to pay for some of the employee’s out of pocket medical costs before they reach the high deductible. For example, an employer might pay for the first $1,500 of medical expenses for a plan that has $4,000 deductible. Employers also often offer their employees a Health Savings Account (HSA) that allows the employees to contribute money to an account for medical expenses on a tax free basis via paycheck deductions. Some plans also cover preventative care outside of the high deductible limit, which can potentially save medical care costs in the long run, as future medical problems are prevented or mitigated.

It appears likely that more and more people will be offered High Deductible Health Insurance Plans in the near future, as employers seek to reign in rising healthcare premium costs, which are often the second largest cost for an employer after salaries. For those who traditionally have not sought a great deal of medical care, which often includes healthy, young, and single people, this type of health insurance can offer a chance to save a great deal of money on healthcare premiums. Older persons, people with preexisting medical conditions, and people with families to support will find their out of pocket healthcare costs will increase when enrolled in a High Deductible Health Insurance Plan, since much of their medical care costs are unavoidable. People in these situations would be wise to research if their employer offers a Health Savings Account to reduce their taxes, which helps to offset some of the additional money they spend for medical care.

After reading this article, you probably still have questions about High Deductible Health Insurance Plans? There are many places to find out more information about these types of health plans, from government-run websites to a slew of online reports and analyses of health insurance. For some, High Deductible Health Insurance is a good thing, as it allows them to save money on health insurance premiums, since they rarely use health insurance, but for many others, these high deductible plans mean they are going to have to pay more for health care services.

High Deductible Health Care Plans: An Overview

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2011 John Coviello


    0 of 8192 characters used
    Post Comment
    • Rock_nj profile imageAUTHOR

      John Coviello 

      9 years ago from New Jersey


      Then we have health insurance companies and the government paying more to try to cure people of their preventable illnesses. It seems as if the right balance with these High Deductible Health Insurance Plans is to include preventive care outside of the deductible. Then people can obtain the preventive care they need to stay well, and the health care industry and employer can benefit from a health consumer that thinks carefully about the money that they spend on healthcare.

    • lisa42 profile image


      9 years ago from Sacramento

      In the long run, discouraging people from preventive care will cost the insurance companies more. What then?


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, toughnickel.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://maven.io/company/pages/privacy

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)