A lot of people worry that if they switch to a high-deductible health plan to save some money, they’ll end up with lousy insurance. It doesn’t have to be that way. Today’s HSA-compatible (high-deductible) plans aren’t the least bit scary; they’re just different … and cash-strapped employers can save up to 60 percent in reduced premium costs.
High-deductible, HSA-compatible health care plans are normal PPO plans. There’s no gatekeeper, and it’s not an HMO where you’re locked into certain doctors or services of the carrier’s choosing. In fact, these plans are actually relatively rich in benefits.
High-deductible health plans are typically thought of as catastrophic prevention plans that won’t help much in the day-to-day. But the current high-deductible health care plans include a wealth of free preventative services that are covered at 100 percent (regardless of your deductible status). You’re also covered at 100 percent after you hit your deductible. Services of such quality are designed to incentivize people to switch. But what’s nice is the model becomes a win-win (for you and the carrier): With more preventative services, carriers are banking on fewer claims and healthier people. Meanwhile, employers get dramatic cost reductions while retaining benefits—and their employees.
Regardless of whether you use your medical insurance a lot or a little, high-deductible health plans can be a great option because your exposure is capped. You know exactly how much your worst-case scenario is going to be on an annual basis.
People pay huge premiums for rich, low-copay plans. But if you’re not going to the doctor, you’re giving the carrier all your money up front for the coziness of having $10 or $20 copays for purely theoretical doctor visits. The truth is that when expenses are broken down, often these low-copay plans end up having a higher out-of-pocket cost to you than the higher-deductible health plans (because of an inefficient usage model).
Your bill might be a little higher up front if you use your high-deductible health plan. But the nice thing is you know where you stand going into every year. You know you have a maximum exposure that is usually lower than a rich copay plan’s potential exposure. And the cost savings are so dramatically different that I would rather save up front than pay through the nose for a low copay that I don’t ever use.
I’m not just saying that. My wife and I switched our family to a high-deductible, HSA-compatible plan. We chose the lowest of these higher-deductible options and we’re still saving $600 a month in premiums. We also know we have a certain maximum exposure and that we’re 100 percent covered after hitting our individual and/or family deductible. I personally love the plan. And in Stephenson Welsh Insurance Services’ most dramatic case, we saved a small business (eight employees) $52,000 initially in premiums. The business then fully funded each employee’s deductible amount (put that money into their individual HSA accounts), so the employees effectively had a zero deductible and 100 percent coverage. After all that, the business still saw a $34,000 savings by switching to a high-deductible plan.
For those totally unfamiliar with HSA plans, it’s a health savings account, which is a portable medical IRA in your name (and tied to your normal health insurance). You can use it to pay for your medically eligible expenses in a manner that’s not subject to federal income taxes. It’s not “use it or lose it.” Funds roll over and accumulate if not spent during the year. In fact, you have a lot of flexibility, including leveraging it to pay for services such as acupuncture, chiropractic, dental and vision.
If any of this is beginning to sound overwhelming (or simply intriguing and worthwhile), we’re here to help. As an insurance broker, we’ll do a free benefits review and free cost analysis to find the right health plan with the right strategy. High deductibles may not be for everybody. And some others want the most-possible savings by going with a high-deductible plan at $4,000 or $5,000 (as opposed to $1,500).
In all honesty, not all brokers are pushing high-deductible plans. That’s because if you lower your premiums, it lowers the broker’s commissions. But it’s the right thing to do by the client. And ultimately if the client is happy, they’ll refer us to others. By having a delighted client, it benefits us in the long run, too.
For more information or a free consultation, please call us at (925) 256-7800 or send us an e-mail.