FAQ’s about High Deductible Health Plans (HDHP)

As a healthcare consumer, you are responsible for choosing the benefits that are the best fit for you and your family. We recognize you need to understand the benefit offerings before you can make these important decisions. These FAQs should help you better understand the high deductible health plans available to you.

What is an High Deductible Health Plan (HDHP)?

As defined by healthcare.gov, a HDHP is a plan with a higher deductible than a traditional insurance plan. The monthly premium is usually lower, but you pay more health care costs yourself before the insurance company starts to pay its share (your deductible). A high deductible plan (HDHP) can be combined with a health savings account (HSA), allowing you to pay for certain medical expenses with money free from federal taxes.

How does an HDHP work?

*Deductible: The amount you pay for covered health care services before your insurance plan starts to pay.

*Coinsurance: The percentage of costs of a covered health care service you pay after you've paid your deductible.

*Out-of-pocket maximum: The most you have to pay for covered services in a plan year. After you spend this amount on deductibles, copayments, and coinsurance, your health plan pays 100% of the costs of covered benefits. The out-of-pocket limit doesn't include your monthly premiums. It also doesn't include anything you spend for services your plan doesn't cover.

*Health Savings Account (HSA): A type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses.

*source: https://www.healthcare.gov/glossary/

Will I have a copayment for prescriptions under a HDHP?

You will pay the full cost of your prescriptions until your deductible is met. After the deductible is met, you will then have copayments for your prescriptions. Remember, the full cost of your prescriptions count toward your deductible and  your out-of-pocket maximum, and you can use the funds in your HSA to pay for prescriptions.

How does a Health Savings Account work?

The Health Savings Account (HSA) is often viewed as one of the most attractive features of participating in a HDHP. Here’s why:

Enjoy “triple tax advantages.”

Money goes in tax free. The money you contribute to your account is not taxed. This means for every dollar you put in your account, your taxable pay goes down by one dollar.

Money grows tax free. Once your account balance reaches $1,000, you can invest it. Any earnings or investment returns on the money in your account is not taxed while in the account.

Money is used tax-free. The money you withdraw for qualified health (medical, dental, vision) expenses is not taxed. As long as you use money in your account for qualified expenses, you don’t have to pay taxes on that money when you take it out.

Unused funds in your account roll over from year to year. There is no “use it or lose it” rule, such as with a Flexible Spending Account (FSA). This means you can use it now to pay for qualified health expenses, or you can save it and use it later, such as when you retire, or if you have a costly medical procedure. The money in your HSA is always yours. You can take it with you if you leave or retire.