High-Deductible Health Plan (HDHP)
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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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By In Around the Web, Do the Math, General Benefits Knowledge, Health Insurance Utilization, Health Savings Accounts (HSAs), High-Deductible Health Plan (HDHP), Participating Provider Organization (PPO) Insurance

How to Make the Most of How Much It Sucks to Make the Most of Health Insurance

Tanja Hester at Our Next Life wrote a fantastic, comprehensive piece on the limitations and downsides of health savings accounts (HSAs) and high-deductible health plans (HDHPs). Before you dig deeper into this post, you should head over there and read it, because it’s chock full of awesomely useful information.

OK, see you back here when you’re finished…

Welcome back!

The Bottom Line

Now that you’ve read her post, you know that HSAs aren’t the magical “triple-tax-advantage” savior some might claim. Yes, there are definite benefits to HSAs if your circumstances are right (more on that in just a moment). But as we’ve said many times, HSAs are a contextually good idea attached to a pretty bad one — HDHPs — and you have to really lean in to avoid letting that bad idea drive your future more than the contextually good one.

Here’s the bottom line: Our “best in the world” health care system puts a great deal of pressure on us as individuals to make the right decisions about our health without giving us much to go on. It’s a system wrought with tradeoffs, and no one type of plan or solution it right for everyone. While HDHPs aren’t doing what they were meant to do, which is to make us better healthcare consumers, older plan designs like PPOs and HMOs aren’t doing that at all, and in fact could end up costing you more than an HDHP, with no added tax benefits and without drastically improving your health and longevity.

The TL;DR message is this: if you’re young and invincible or old and rich already, you can get an HDHP without much further consideration. For the other 99%, read on about some of the challenges we face as “consumers” of healthcare, with an HDHP and without one.

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By In Health Insurance Utilization, Health Savings Accounts (HSAs), High-Deductible Health Plan (HDHP)

Know Your HDHP’s Preventive-Care Benefits

If you have an HDHP, you may be working from the assumption that your insurance won’t cover anything before you meet your deductible. While the insurance company may wish that was the case, HDHPs are able to (and, in some cases, must) cover certain kinds of preventive care. These services can add up to hundreds or even thousands of dollars in essential services every year, so be sure to read the fine print on your plan before and after you choose it, and also to ask your company’s benefits administrator for these details if you can’t find them on your own.

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By In Health Financial Accounts, Health Savings Accounts (HSAs), High-Deductible Health Plan (HDHP), Individual Health Insurance

High Deductible ≠ HSA-Eligible

I saw an interesting question posted on Twitter this weekend that got me thinking about HSA eligibility. The question was about whether the new short-term, limited duration health plans being offered under a new expansion by the Trump Administration qualify as high-deductible health plans (HDHPs) and, as such, also qualify for health savings accounts (HSAs). I didn’t see that an answer was tracked down yet but the gist of the argument is that since HSAs are governed by the IRS and not Health and Human Services, which approves health insurance plan designs, then an STLD plan could also be an HDHP.

Why should this wonky distinction matter to you? Two reasons:

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By In Do the Math, Health Financial Accounts, Health Savings Accounts (HSAs), High-Deductible Health Plan (HDHP)

Why We Talk So Much About HSAs for FI

Confession: It took me a long time to come around to liking HSAs. The analyst in me looked at “consumer-driven health plans” (CDHPs) as not consumer-driven at all but rather a way for employers to get us employees to pay more when we get sick. To be honest, I still feel that way. High-deductible health plans (HDHPs), which is the plan type you must have in order to qualify for a health savings account (HSA), are a hedge that allows employers to shift some of the ever-growing expense of providing insurance to the employees for which they’re providing it. They’re not ideal if you have a family or are thinking of starting one, you have a chronic condition you must manage, if you’re low-income and have an accident — basically anything that requires you to see a doctor or get a prescription or other medical products/services.

But there are caveats that make them pretty ideal if you’re on the FI journey.

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By In Health Financial Accounts, Health Savings Accounts (HSAs), High-Deductible Health Plan (HDHP)

How to ‘Think in Bets’ About Your Benefits

Understanding the way that we think and make decisions is incredibly important when it comes to thinking about your benefits and your financial goals. Our minds work in an incredible way that enables us to make sense of the world without too much undue stress, but sometimes they can lead us in the wrong direction.

To improve our decision-making process, we should try understand how we naturally interpret events using the “rules of thumb” (or heuristics) our brains are wired to make. This prevents us from stressing out about many of our small decisions, but it also means we make many decisions without really considering whether we made the right decision or not. Ideally, make a quick judgment call on the potential impact of your decision, and proceed from there. When buying your morning coffee — and especially if you are in line in front of me— just make a decision.

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