More employees are enrolling in a high-deductible health plan (HDHP) each year, including more than half of U.S. private-sector workers in 2021. But there are still misunderstandings that exist among employees about the significant value of an HDHP (or HSA-eligible health plan) and how it compares to a traditional health plan. If you have recently enrolled or are considering enrolling in an HDHP, keep reading to learn what you might be missing about the benefits of HDHPs.
HDHP vs. PPO deductible
Nearly two-thirds of large employers provide their employees with the choice of an HDHP and a traditional health plan, such as a preferred provider organization (PPO). So, what are the big differences between the two? Typically, an employee enrolled in a PPO will have higher premiums and a lower deductible than an employee enrolled in an HDHP.
But over the past few years, the difference between a PPO deductible and an HDHP deductible has shrunk. For example, the 2022 PPO employee-only deductible averaged $1,322 and the 2022 HDHP annual deductible limit was $1,400 for an individual.
HDHP financial opportunities
One of the trends we’ve noticed is that HDHP participation is strongest with individuals in their mid-20s to early 30s. This could be because employees newer to the workforce have less health concerns and want to pay a lower premium each month because they’re on a stricter budget.
HDHPs can actually be a great healthcare saving option for employees of all ages. Along with paying a lower premium, HDHPs offer financial opportunities that PPOs do not because employees can enroll in a health savings account (HSA), but only if they’re also enrolled in an HSA-eligible HDHP. HSAs come with a variety of potential benefits, including employer contributions, extra savings on eligible health expenses, and the ability to invest your money over time for healthcare in retirement.
Leading a healthier lifestyle
With physical and mental health needs becoming even more important to employees over the past few years, enrolling in an HSA-eligible health plan can help encourage individuals to lead a healthier lifestyle. If an individual only has to use their insurance for routine preventative care and they’re comparison shopping for high-quality and low-cost medical care, their HDHP is saving them a significant amount of money in the long run.
HDHP chronic health conditions
One common misconception about HDHPs is that individuals with chronic health conditions should never enroll in a high-deductible health plan. But there are options for employees with chronic health conditions. Starting in 2020, IRS Notice 2019-45 stated that certain expenses for chronic condition care are considered preventative for participants enrolled in HDHPs, meaning these expenses are eligible to be covered by insurance before participants reach their required deductible.
According to a recent survey, 45 percent of HDHP participants said that pre-deductible chronic disease prevention coverage influenced their health plan decision. And a quarter of traditional plan participants were likely to choose an HDHP plan instead if offered this type of coverage.
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The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own legal counsel, tax and investment advisers.
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