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 The right health plan depends on your financial situation, medical needs, and long-term goals. Reasons to consider an HDHP
Myth: “I spend too much at the doctor to choose a high-deductible health plan.” Among the biggest myths in healthcare is that high-deductible health plans (HDHP) are not great for families that spend a lot of money each year on doctor visits and medications. Most see the higher deductible and believe it will simply cost too much. But there are several other factors to consider as well. As you decide between health plans, be sure to calculate your true costs and long-term healthcare spending. Below are four factors for consideration. DeductiblesBy definition, HDHPs carry higher deductibles than traditional health plans. So, HDHPs require you to pay more out of pocket before your insurance kicks in. But how much more? It could be less than you think. Review your plan options carefully. You may find only a marginal difference in deductibles. In addition, HDHPs also may cover 100% of your preventive care. So, you won’t pay anything for your routine annual physical and other required preventative care. PremiumsCompared to HDHPs, traditional health plans tend to have much higher premiums, which means more money out of each paycheck. Note that your premiums likely don’t count toward your deductible. So, your premiums are gone whether you use the insurance or not. Do the math. You may find that the annual premium savings of an HDHP offsets the comparatively higher deductible. At minimum, more take-home pay can potentially make it easier to cover that higher deductible. HSA eligibilityWhen choosing a health plan, some only consider their healthcare spending in the next 12 months. But how will you pay for healthcare expenses when you’re 70 or 80—or even five years from now? If you plan to use your 401(k) to pay for healthcare expenses in retirement, you’ll also need to plan for the income taxes on the distributions. By contrast, with an HSA you’ll never pay taxes on money used for qualified medical expenses. Not next year, not in ten years, not in fifty years. So, if you spend a lot on healthcare, you can save a lot more using tax-free money.1 The best part? HSA funds never expire. They stay in your account even if you change employers, health plans, or retire. But there’s a catch. HSA eligibility requires enrollment in an HDHP. Traditional health plans are not HSA eligible. As you weigh the costs and benefits of an HDHP, ask yourself: What is it worth to be able to grow tax-free investment earnings and spend money tax-free on out-of-pocket healthcare expenses?2 If you add up the potential tax-free earnings and tax-savings over your lifetime, the savings may dwarf the marginal extra deductible cost each year. Choose HSA and create long-term health savings. Then, you can use that money tax-free to pay for thousands qualified medical expenses. See everything you can buy at the HSA Store.3 Employer contributionsIn many cases, employers may offer a contribution to your HSA for choosing an HSA or completing other qualified activities. Employers usually deposit that contribution into your HSA on the first day of the new plan year. Some even offer an HSA contribution match. But keep in mind that employer contributions count toward your total HSA contribution limits. In total, employer contributions could put thousands of extra dollars into your account each year. At first, traditional health plans might appear marginally cheaper. But once you consider the HDHP employer contribution, the case for an HDHP becomes much stronger. Don’t leave free money on the table. Have questions? Visit our Help Center. Ready to shop? Visit the HSA Store.4 Have Questions?The Help Center is your source for helpful guides, answers to your questions, and access to our helpful Member Services Team. Visit our Help Center HealthEquity does not provide legal, tax or financial advice. Always consult a professional when making life-changing decisions. 1HSAs are never taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states recognize HSA funds as tax-deductible with very few exceptions. Please consult a tax advisor regarding your state’s specific rules.Return to content 2Investments are subject to risk, including the possible loss of the principal invested, and are not FDIC or NCUA insured, or guaranteed by HealthEquity, Inc. Investing through the HealthEquity investment platform is subject to the terms and conditions of the Health Savings Account Custodial Agreement and any applicable investment supplement. Investing may not be suitable for everyone and before making any investments, review the fund’s prospectus.Return to content 3HealthEquity and The HSA Store are separate, unaffiliated companies and are not responsible for each other's policies or services.Return to content 4HealthEquity and The HSA Store are separate, unaffiliated companies and are not responsible for each other's policies or services.Return to content Article link copied to clipboard Can I contribute to my HSA if I no longer have a HDHP?If you no longer are enrolled in an HDHP you are not eligible to make contributions to your HSA, but you may request withdrawals for qualified medical expenses.
How much is considered a high deductible health plan?For 2022, the IRS defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. An HDHP's total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can't be more than $7,050 for an individual or $14,100 for a family.
What is the benefit of a high deductible health plan?HDHPs are thought to lower overall health care costs by making individuals more conscious of medical expenses. The higher deductible also lowers insurance premiums, leading to more affordable monthly costs. This arrangement benefits healthy people who need coverage for serious health emergencies.
When should you use a high deductible health plan?A high-deductible health plan might be right for you if:
You have the means to make significant contributions to an HSA. You're healthy and are interested in using an HSA as a way to save or invest money. Your employer HSA contribution is enough to cover much or most of your deductible.
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Contributions to a high deductible health plan
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