#030  – Why Your High Deductible Health Plan Is Not As High As You Think exposes the misperception that an HDHP is too expensive.  Scott W. Dowling provides a real world example – from close to home – that illustrates why there is no advantage to having a traditional low deductible plan and how it ultimately costs you more compared to a High Deductible Health Plan.

Focus on Out Of Pocket Maximum – Not Deductible

The total amount you may spend on an insurance claim includes the amount you pay for the insurance premium plus the total amount you pay Out Of Pocket.  Out of Pocket includes deductibles and coinsurance amounts.  The maximum Out Of Pocket cost is expressly stated in the plan description.  Make certain to locate the maximum Out Of Pocket amount in the plan description when you are comparing your options.  Even plans with $250 or $500 deductibles can have maximum Out Of Pocket amounts over $10,000 and even $15,000 annually.

The Goal:  Pay the least amount of premium AND the least amount in claims

Your goal is to pay the least amount of money while ensuring you are 100% covered.  The money you pay for premium is part of the total you need to consider when comparing your options.  Lower deductible plans cost more in premium than higher deductible plans.  Out Of Pocket costs are capped at a certain amount as stated in the plan design.  The maximum Out Of Pocket states the limit that insurance plan will start to cover all of your remaining annual expenses at 100% – meaning you have nothing further to pay for claims during that annual period.  Know your Out Of Pocket maximum.

A High Deductible Health Plan with a Health Savings Account costs less overall

A High Deductible Health Plan (HDHP) with a Health Savings Account (HSA) costs less in annual premium than a traditional PPO or HMO plan.  Depending on your tax bracket, a traditional PPO or HMO plan can cost 20% to 30% or more for Out Of Pocket costs compared to an HDHP with an HSA.  When you pay your Out Of Pocket costs with your HSA, the money you spend has not been taxed.  When you pay your Out Of Pocket costs for a traditional PPO or HMO plan, the money you spend has already been taxed.  For example, an individual in the second lowest marginal tax bracket, 22%, will spend 28% MORE on Out Of Pocket expenses.  $10,000 paid from your HSA is the same as $12,820 if you have a traditional PPO or HMO.   A PPO or HMO costs a lot more money!

I prefer Lively HSA (full disclosure, I receive a nominal fee from Lively…at no cost to you)

Surprise!  Blowing Through Your Out Of Pocket Maximum On One Claim Is Very Easy To Do

This example may be relatable for many of you who either participate or are parents of those who participate in competitive athletics.  All of the kids in the family have been competitive athletes into college.  Our rugby player had an unfortunate accident that required surgery – on his thumb!  A broken thumb doesn't sound that bad, but after 3 days of visiting a clinic, getting an x-ray, a second opinion and then surgery including 9 screws and a plate, the total claim came in at over $15,000.  And that's at the network discount!  We're easily through the annual Out Of Pocket maximum……for a broken thumb!!!!

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