Pros and Cons Of a High Deductible Health Plan

The University of Kentucky added a high-deductible health insurance plan to its mix of options for the enrollment period that ends this Friday, May 10. UK continues to add benefit options for faculty and staff that provide arguably the best mix of benefits in central Kentucky. Choices, however, can be tricky. Here are some pros and cons on high-deductible plans and a link to a quite comprehensive, but understandable, article on Health Savings Accounts (HSAs).

What is a high-deductible plan?

For 2019, the IRS defines a high-deductible health insurance plan (HDHP) as one with a deductible for singles of at least $1350 and $2700 for families. Remember, the deductible is the amount you’ll pay for out of pocket medical expenses before your insurance pays anything. *This is the key question when considering a HDHP – do you expect to incur a lot of medical expenses this year?* In addition, a HDHP also has an out of pocket maximum of no more than $6750 for singles and $13,500 for families – if a UK employee uses a UK HealthCare provider, the out of pocket max is $2700 for singles and $5400 for families (better than the IRS mandates). That’s the most the plan will make you pay out of pocket for medical expenses covered by your plan this year.

Pros of a HDHP

In general, the advantage of a HDHP is lower premiums. For the UK plan, however, the premiums are the same as their other plan offerings but they sweeten the pot by contributing $1000 per year for singles and $2000 for families into a Health Savings Account (HSA). In short, an HSA is an account into which you can contribute pre-tax up to $3500 per year if you’re single and $7000 for a family – lowering your taxable income – and withdraw a portion for medical expenses tax-free. If a HDHP plan is right for you, an HSA is a really good deal. Here is a link to a quite good article on HSAs: https://www.fool.com/retirement/2019/03/14/your-complete-2019-guide-to-t....

So, if you think your medical expenses for the year will be less than the $1,000 or $2000 UK contributes to your HSA, you really should consider this option. If you think they’ll be more than that, then you need to compare plans more carefully: 1) Under the HDHP you’ll pay 10% of the cost of doctor visits and items such as inpatient hospital stays after you meet your deductible, but before you reach your maximum out of pocket; 2) Under the traditional UK HMO plan, you only pay a $10 co-pay for an office visit and $200 for an inpatient hospital stay.

Cons of a HDHP

The biggest risk to a HDHP is that your costs for doctor visits and other medical expenses for you and your family exceed what UK will contribute to your HSA - $1000 for singles and $2000 for families – and you’ll have to pay those expenses yourself until you hit the out of pocket max of $2700 for singles and $5400 for families (within the UK Network). So, you may end up paying up to $3400 more as family for healthcare than you would under one of the more traditional plans. Here’s a link to a recent NPR story on this issue: https://www.npr.org/sections/health-shots/2019/05/03/719519579/employees....

However, if you have low expenses this year, you can bank what UK and you contribute to your HSA and carry it over to next year, giving you a bigger cushion for unexpected medical expenses next year.

Summary

As usual, UK is offering a wide range of health insurance options so faculty and staff may choose what’s best for them. The HDHP and accompanying HSA is an option that may provide real benefits for those expecting low healthcare expenses this year and deserves consideration but, as with every benefit decision, make sure you understand what you’re purchasing first. Obviously, if you want to dig further, call UK Benefits or look at the UK Saver plan here https://www.uky.edu/hr/benefits/open-enrollment/employee-medical-plans/h....

Steve Byars, CFP®