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When you are determining which health care benefits are best to offer to your employees, there are a few options to choose from. Over the course of the past few weeks, we have explored the advantages and disadvantages of each medical benefits solution to help you provide the best group health benefits, meeting both the needs of your organization and those of your employees.
Today, we are exploring the advantages and disadvantages of HDHP insurance.
What is an HDHP?
A High-Deductible Health Plan is a health insurance plan with low premiums and high deductibles, compared to traditional health plans. An HDHP is a requirement for an HSA.
How an HDHP works
An HDHP involves the participant assuming all expenses until a deductible amount has been met. Any expenses that are greater than the deductible will be covered as part of the health plan. The insurer covers all medical expenses after the deductible has been met in full.
Advantages of an HDHP
An HDHP has the ability to pay much lower monthly payments for medical coverage, with premiums being more reasonable it is possible to save money for the future in case a high deductible arises. Monthly medical costs decrease substantially with an HDHP.
HDHPs are also ideal for young people as they do not often deal with major illnesses. Health coverage is something they have just in case something happens unexpectedly. When the probability of a medical expense is low, an HDHP offers adequate coverage with lower costs in the long run.
Disadvantages of a HDHP
Unfortunately, if a participant has a long-term health condition or frequent medical needs, an HDHP is ineffective. These participants will be faced with the high deductible constantly and will essentially be paying for all medical expenses out-of-pocket. These people benefit from lower deductibles and lower payment obligations.
Also, while low premiums are the selling feature of HDHPs, these low payments can rise over time. As the monthly payment increases, the advantages decrease.