Why Choose a High Deductible? The Real Benefits of an HDHP
Why would anyone choose to pay more before insurance helps? It sounds backward. But millions of people pick HDHPs on purpose. Here's why.
Benefit 1: You pay less every month
HDHPs usually have lower premiums. That's money you keep in your pocket every single month, whether you see a doctor or not. If you're healthy, you might pay less over the whole year than you would with another plan.
Benefit 2: You get a Health Savings Account
Most HDHPs let you open a Health Savings Account (HSA). This is the biggest perk. An HSA has three tax breaks:
Money goes in without being taxed.
It grows without being taxed.
It comes out without being taxed when you use it for medical costs.
No other savings account gets all three.
Benefit 3: Your employer might add free money
Many employers put money into your HSA for you. Some add a few hundred dollars a year. Some add more. That's free money just for picking the plan.
Benefit 4: Your savings are yours to keep
HSA money never expires. If you don't spend it this year, it rolls over. If you change jobs, it goes with you. Over time, you can build a big cushion for health costs.
Benefit 5: Your money can grow
Once your HSA has some money in it, you can often invest it, like a retirement account. Money you don't need now can grow for later in life, when health costs are often higher.
Meet Taylor
Taylor is 28 and healthy. Here's how two plans compare for Taylor's year:
Monthly premium
PPO: $200
HDHP: $90
Premiums for the year
PPO: $2,400
HDHP: $1,080
Employer adds to HSA
PPO: $0
HDHP: $500
Taylor's care costs (2 visits)
PPO: $60 in copays
HDHP: $300
Total cost
PPO: $2,460
HDHP: $880
The HDHP saves Taylor $1,580. That total counts the $500 from Taylor's employer. Taylor used it to pay the $300 in care costs, and the $200 left over stays in the HSA for next year.
Who gets the most from an HDHP?
People who are mostly healthy
People who can save some money for care
People who want to build long-term savings
If you have a lot of medical bills each year, another plan might cost less. We'll help you compare in our next article.
Key takeaways
HDHPs often cost less each month.
The HSA gives you three tax breaks and money you keep forever.
HDHPs work best for people who are mostly healthy and can save.
