By In Do the Math, High-Deductible Health Plan (HDHP), Money-Saving Tips

HDHP: Managing Your Costs Before Meeting Your Deductible

With car insurance, deductibles are relatively straightforward — anything not related to damage of some kind, i.e. any maintenance or services, is not covered. You get your oil changed, you pay for it. You get your car washed, you pay for it. You get in a wreck and your car is totaled, your insurance pays for all costs over your deductible. Simple as that.

With high-deductible health plans (HDHPs), it’s almost the opposite. There are a number of preventive care services that you can have covered at no cost to you, provided they are “in-network,” meaning the doctor or healthcare provider you choose much be “covered” by your insurance. That’s lesson 1: even though you’re paying out of your own pocket for most things, if you want your insurance to pay for something before your deductible it met, you have to follow their network rules.

These preventive services are things like an annual check-up or physical, as well as screenings and diagnostic tests frequently associated with an annual physical, and other tests like cancer screenings. These services are mostly mandated to be free under the Affordable Care Act, but some employers have “grandfathered plans,” which means the plans were exempted from ACA regulations on the premise that they would remain cheaper than ACA coverage (something that hasn’t proven to be true, but I digress…).

The best thing for you to do is to find your plan details or request them from your company’s HR/benefits manager or directly through your health insurance provider. My family is currently on an individual ACA plan and I found my information pretty easily through the site where I bought my insurance, HealthSherpa (full disclosure: I do consulting work for HealthSherpa but don’t get paid to post the link I just posted — I just think they’re a great company if you qualify for ACA coverage), as well as through my health insurance provider site, SCBlues (full disclosure: I don’t consult for SCBlues 😜).

Anyway, take a look at what pre-deductible services you get for free and take advantage of the ones you think you need or that a doctor recommends for you.

Now, lesson 2: Even before the deductible is met, you want to pay attention to your expenses, because they will impact your overall costs. How? Well, sadly, pre-deductible costs are not created equally, nor are qualifying expenses.

Say you tweak your knee skiing. You need an x-ray, so you call around to some places (always ask the price!) and get the costs. You will likely find, as I have multiple times, that there is a huge difference between the “covered” pre-deductible cost for the service and the “cash” cost. It’s not uncommon for covered costs to be double that of cash costs. That seems like a no-brainer to go with the cash cost, right? Well, here’s the kicker: If you opt to pay the cash cost (not “cash” per se but rather the listed “cash cost,” because you can pay the “covered cost” with cash), that amount DOES NOT COUNT TOWARD covering your deductible. Sadface.

I don’t know why it’s done this way and I wish a law will be passed that will outlaw this “network cost” practice, but in the meantime you need to be mindful of the consequences of cash vs. covered.

While there is never a guarantee, if the service you need is relatively minor with little or no need for follow-ups (read: no additional costs), you may be better off paying cash to save the money right there and then. It seems like a smart move if the covered cost is, say, $500 and the cash cost is $250, which is a realistic scenario. If you think that there’s no way that you’ll cover your deductible without some kind of catastrophic accident happening, then pay cash — sort of like paying cash for a minor ding to your car rather than going through the hassle of filing a claim.

Now, you may end up having more costs and then you will want to shift to paying the deductible cost, but that would seem to make sense only if you truly expect to exceed your deductible by a large margin. (As a reminder, once you cover your deductible, you pay $0 for any additional services through most HDHP arrangements.)

Obviously this scenario doesn’t apply for people with chronic conditions or planned medical needs like childbirth. But for those minor scratches and dings, always ask the price and decide on your own whether cash is best or you want to make sure you’re paying down your deductible. YMMV.

And yes, take advantage or your free preventive care! Not just because you can, but because keeping track of your health could save you a ton of money AND give you a happier, healthier life in retirement, early or otherwise.

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