Employee high deductible health plans

American workers selecting high deductible health plans put themselves at risk for large medical costs they'll have to pay.
employee high deductible plans

An alternate planning strategy can be a huge benefit for working Americans with high deductible health plans.

“If you can’t contribute the maximum annually to your HSA, consider a very-low-cost alternate planning strategy. Shift some of the huge financial risk you face to an emergency cancer-only or critical illness insurance policy.”

Jesse Slome, director of the American Association of Critical Illness Insurance

High deductible health plans put more individuals at financial risk. Enrollment in high deductible health plans (HDHPs) continues to grow. They offer savings to workers that make them attractive. From 2007 to 2017, enrollment in HDHPs couupled with a Health Savings Account grew from 4.2% to 18.9% among adults between 18 and 64. HDHP plans without a Health Savings Account grew from 10.6% to 24.5%.

“The Covid-economy is likely going to increase the number of working age adults opting for a high-deductible health plan option during open enrollment for 2021,” predicts Jesse Slome, director of the American Association for Critical Illness insurance. “Individuals with HDHPs pay lower monthly insurance premiums. But they risk paying more out of pocket for medical expenses until their deductible is met.”

HDHP potential risk is rarely covered by your HSA account balance

The annual deductible for an individual with an HSA-qualified high deductible health plan was $2,476 (2019) according to the Kaiser Family Foundation. For family coverage the annual deductible would was $4,673. “In addition to meeting the deductible, most plans require you pay costs until you reach the out-of-pocket maximum,” Slome adds.

The out-of-pocket maximum for single coverage with an HSA-Qualified HDHP is $4,492. “Most people don’t contribute to their health savings account. When a crisis hits, they won’t have the needed emergency funds to pay the deductible and out-of-pocket costs,” Slome adds.

In 2018, the average HSA balance was $2,803, according to data from the Employee Benefit Research Institute. That’s up from the average balance of $1,991 seven years earlier. “Among HSA accounts with contributions, individual contributions in 2018 averaged $2,017,” Slome reports.

High deductible health plans alternate planning strategy

High deductible health plans are a great option when money is tight, Slome contends. “If you can’t contribute the maximum annually to your HSA, consider a very-low-cost alternate planning strategy. Shift some of the huge financial risk you face to an emergency cancer-only or critical illness insurance policy.” By emergency a plan should cover deductibles, co-pays and uncovered medical expenses which will fall into the $10,000 to $20,000 range.

“Cancer is clearly the greater risk generally before age 65 and 70 and cancer insurance is going to be far less expensive,” Slome notes. A $10,000 benefit might cost a 45 year old non-smoking male about $50 a year.

If your company offers employer critical illness insurance, read suggestions and tips for comparing shared by the Association. To learn more about how much critical illness insurance do I need, read the post.

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