What is a high-deductible health plan?

High-deductible health plans trade off lower monthly premiums for higher out-of-pocket costs, largely in the form of a deductible that must be paid before coverage kicks in.

"The burden of higher and higher health care costs has been shifted to the consumer, through higher deductibles, instead of the insurance companies," says Dr. Dana Simpler, a doctor of internal medicine at Mercy Medical Center in Baltimore.

A high-deductible health plan is defined by the IRS as one with an individual deductible of at least $1,400 or a family deductible of at least $2,800. While the out-of-pocket maximum is capped at $7,050 for individuals and $14,100 for families, that’s still a lot of money for many families.

There are options, however, to help you keep that low monthly premium while still getting the care you need.

How to save money with a high-deductible health plan

With the right approach, a high-deductible health plan can work for your budget as well as your healthcare needs. These eight tips will help you get the most out of your health insurance.

1. Get the right level of care

Emergency room visits are expensive, so choose another option if possible. And don’t delay preventive health care services, which can prevent you from needing medical care in the future and are covered without charge on ACA plans.

Get care sooner and less expensively instead of waiting until your situation becomes acute and you're heading to the emergency room, says Sam Ho, chief medical officer for UnitedHealthcare.

If you have a minor health issue, consider a drug store clinic or a telehealth visit from your home, both of which may cost less than an office visit. If it’s not an emergency, choose urgent care over the ER when you need immediate care.

2. Shop around for health care services

Before seeking care, you can shop in advance to check the prices of procedures and medical services.

Two options include Fair Health Consumer, which gives estimates based on claims information they receive on medical and dental services across the country, and Healthcare Bluebook, which bases its information on a database of rates paid by private insurers.

You also can call providers in your area to see what they charge for various services. Explain that you have a high-deductible health plan and need help minimizing costs.

3. Use in-network providers

Getting care outside of your network can increase your costs substantially. A health maintenance organization (HMO) likely won't reimburse you for any out-of-network services. A preferred provider organization (PPO) may charge you double or more for out-of-network care.

"Know what health care providers are in your insurer's network," says Ho. "You'll pay lower rates for services provided by hospitals, physicians and others in your network."

You may also pay a lower deductible when you receive services from health care providers who are in your network.

Your insurance company should have a provider directory or "find a doctor" tool so you can see what providers are in-network.

4. Save on medication costs

Generics are the way to go, if possible.

"To save on drug costs, try generic medications," Simpler advises. "Or if it's a new medication, ask if your doctor can provide you with a free sample. Otherwise, you might buy a month's supply of medication and three days into it, find you can't tolerate it."

Pharmaceutical companies may offer their own assistance. Patient assistance programs (PAPs) are run by pharmaceutical companies and give away billions of dollars worth of drugs to patients who meet certain eligibility criteria, says Richard Sagall, president of the nonprofit NeedyMeds. Criteria vary from program to program.

Drug makers may have co-pay cards available, which help reduce the price you pay for medication.

Another option is a drug discount card. Cards may be available from state governments, pharmaceutical firms, retailers or nonprofits. But Sagall cautions some carry high upfront fees. Those obtained from nonprofits are often free or low-cost.

5. Ask questions to reduce health care costs

Don't be afraid to ask your physician about costs upfront, Simpler says, and ask about a less expensive alternative to what your doctor recommends. Be upfront about the fact that you are trying to minimize costs due to your high-deductible health plan and need to explore the least expensive viable option.

You can also question whether all the tests your doctor orders are essential. "Try conservative things first" before you opt for surgery, she says.

6. Negotiate prices

In some cases, you can negotiate with your provider to pay a lower price for services, or you may receive a discounted price if you offer to pay your bill in cash.

You also may be able to pay your bill over time rather than in one lump sum.

7. Take advantage of wellness incentives

"An increasing number of employers are offering wellness incentives. These programs provide rewards if you quit smoking, lose weight, or make other positive health changes," Ho says.

You might earn a major discount on your health insurance premium or gain other perks for taking part. Bonus: you may also improve your health.

8. Set up an HSA or FSA

There are two options to combine high-deductible health insurance plans and savings accounts. Both allow pre-tax contributions.

A health savings account (HSA) or a flexible savings account (FSA) can both be set up by your employer, although you can also set up an HSA on your own. Your employer may contribute to these accounts on your behalf.

You can pay eligible healthcare expenses from either account, and withdrawals are tax-free. Among the key differences: FSAs are use-it-or-lose-it, while HSAs roll over at the end of the year. Research both before you decide to pick the right plan for your needs.

Benefits of a high-deductible health plan

While high-deductible health insurance plans aren't for everyone, they may make sense for those who are generally healthy and prefer to pay the lowest possible health insurance premiums. Carefully consider the pros and cons of high-deductible health insurance.

Make sure you have compared insurance quotes and selected the plan that works best for your healthcare needs and budget.

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Low-income Americans qualify for Medicaid. Thirty-eight states expanded Medicaid eligibility, so lower-middle-class Americans may also be eligible in those states. Medicaid offers comprehensive benefits, but at little to no cost depending on your income. Each state has its own eligibility. Some states are flexible with Medicaid eligibility for people who are pregnant, a parent or disabled. If your household income is below 138% of the federal poverty level, you're likely eligible for Medicaid if you live in a Medicaid expansion state. That level is $17,609 for an individual, $23,791 for a family of two, $29,974 for a family of three and $36,156 for a family of four. Non-Medicare expansion states have stricter income guidelines. Check with your state's Medicaid program to see if you qualify.
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The Affordable Care Act lets children stay on a parent's health plan until the age of 26. Having a child on a parent's health plan may or may not increase premiums. It depends on whether you already have family coverage when adding the child to the plan. If a parent already has family coverage, adding a child won't likely increase premiums. However, going from single or couple to family coverage could cause premiums to skyrocket. The average single coverage employer-sponsored plan premium is $1,186. The average family plan is $5,447.
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Preferred-provider Organization (PPOs)

  • Pay higher premiums with a lower deductible
  • You have access to more providers, but pay much more for health insurance
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You want the ability to get out-of-network care
Preferred-provider organization (PPOs) plans are the most common type of employer-based health plan. PPOs have higher premiums than HMOs and HDHPs, but those added costs offer you flexibility. A PPO allows you to get care anywhere and without primary care provider referrals. You may have to pay more to get out-of-network care, but a PPO will pick up a portion of the costs.
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Health maintenance organization (HMO)

  • Pay higher premiums with a lower deductible
  • Restricted network of providers with lower premiums
  • You want to choose a primary care physician
  • You don't mind getting a referral
  • You don't care about the ability to get out-of-network care
Health maintenance organization (HMO) plans have lower premiums than PPOs. However, HMOs have more restrictions. HMOs don't allow you to get care outside of your provider network. If you get out-of-network care, you'll likely have to pay for all of it. HMOs also require you to get primary care provider referrals to see specialists.
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High-deductible health plans (HDHPs)

  • Pay lower premiums with a higher deductible
High-deductible health plans (HDHPs) have become more common as employers look to reduce their health costs. HDHPs have lower premiums than PPOs and HMOs, but much higher deductibles. A deductible is what you have to pay for health care services before your health plan chips in money. Once you reach your deductible, the health plan pays a portion and you pay your share, which is called coinsurance.
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Exclusive provider organization (EPO)

  • Restricted network of providers with lower premiums
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You don't care about the ability to get out-of-network care
Exclusive provider organization (EPO) plans offer the flexibility of a PPO with the restricted network found in an HMO. EPOs don't require that members get a referral to see a specialist. In that way, it's similar to a PPO. However, an EPO requires in-network care, which is like an HMO.
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The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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Silver is the second most popular plan in the ACA exchanges, with 35% of people with a Silver plan. Silver has lower premiums than any plan except for Bronze. However, it has lower out-of-pocket costs than Bronze. Silver plans pick up 70% of the costs, while members pay 30% The average single coverage in a Silver plan is $481 monthly and $1,179 for a family plan.

Bronze is the most popular type of plan in the ACA exchanges, with 41% of members with a Bronze plan. These plans have the lowest premiums, but also the highest out-of-pocket costs in the exchanges. Bronze plans pick up 60% of the costs, while members pay 40%. The average single coverage monthly cost in a Bronze plan is $440 and $1,080 for a family plan.

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People who would prefer to pay higher premiums with a lower deductible may want the below plans
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Platinum plans have the highest premiums but the lowest out-of-pocket costs. So, you pay more for the coverage initially but less than other plans when you need health care services. Platinum plans pick up 90% of the costs, while members pay 10%, Not many health insurers offer Platinum plans. Only 2% of members in ACA plans have a Platinum plan, so you may have trouble finding one. The average monthly premiums for single coverage in a Platinum plan is $706 and the average family coverage costs $1,460.

Gold plans have lower premiums than Platinum, but higher premiums than Silver and Bronze. Gold also has lower out-of-pocket costs than Silver and Bronze, but higher than Platinum. Gold plans pick up 80% of the costs, while members pay 20%. The average monthly premium for a single Gold plan is $596. Family coverage averages $1,426 per month.

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Health insurance FAQs

How do I know if I have a high-deductible health plan?

Your plan will be labeled as an HDHP plan, so watch for that when you buy your health plan. Another easy way to tell: if you are offered an HSA, you have a high-deductible plan. HSAs are only available to people who have an HDHP.

How much is high-deductible health insurance?

The cost varies. According to the Kaiser Family Foundation, the average employer-sponsored HDHP plan in 2021 cost $1,242 annually for a single person and $5,129 for a family.

How does a high-deductible health plan work?

With a high-deductible health plan, you pay most of your healthcare costs upfront (some preventative services are cost-free) until your deductible is met, after which you’ll pay your plan’s coinsurance or copay amounts. Once you meet your out-of-pocket maximum, all healthcare needs are covered at 100% 

Should I get a high-deductible health plan?

Choosing a health plan is a very personal decision, so it’s important to weigh the pros and cons of all of your options. HDHPs are usually recommended for people who don’t anticipate a lot of medical costs throughout the year.