HDHP FAQ — Factors to Consider When Choosing a High Deductible Health Plan
November 20, 2017 | Tina Pelland
A question that we commonly hear at Varipro is “If I want the lowest monthly premium possible I should just select an HDHP?”. So, we decided to address this topic in this week’s article.
First, let’s briefly define an HDHP. A High Deductible Health Plan is a health insurance plan with lower premiums (upfront cost) and higher deductibles. HDHP participants are also required to have HSAs, as long as the HDHP is federally approved.
Now, focusing on the question at hand, a simple answer is no. This answer may seem a bit bleak, so let me explain. If you are an employer who is providing benefits for your workforce, there are factors to consider before choosing an HDHP or THC (Traditional Healthcare Plan) for your workers.
Factors to consider before choosing an HDHP
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Employee Health:
The first and most important factor for employers considering an HDHP is their workforce. If your employees are younger and healthy, they should not need a large number of medical services throughout the year. Meaning their medical costs will not be as high, and employers and employees will both save. However, if a workforce is not as healthy, an HDHP may not be the best choice as they will have various medical costs, and meeting their deductible will be an expensive endeavor.
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Employee Out of Pocket Cost:Secondly, employers should consider their employee’s out of pocket spending, which coincides with a workforce’s health. Employees who need more medical attention will have more medical costs. Obviously, a high deductible would not be ideal for this type of employee. An excellent tactic for employers to gather this information, rather than guessing, is to use a blind-confidential survey. This way employees can be honest about their medical history, and employers can make a well-informed decision. Keep in mind, an important factor that out of pocket spending will impact is employee retention.
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HSA Eligibility:
Health Savings Accounts have been proven to be a great help to employees with HDHPs. However, employees are only allowed to have HSAs if their plan falls within federal guidelines. Every year the IRS will set new rules and regulations for HSAs, that plan providers need to ensure their plan follows, or plan participants will lose the privilege of having an HSA.
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Regulations:
Employers should also review every regulation when considering an HDHP. There are federal guidelines to follow, and rules vary from state to state. There are usually fewer regulations to abide by, and if they are not, employers are hit with costly fees.
The Benefits of an HDHP
After considering all of the factors, you have discovered that an HDHP works for you and your workforce, there are a few benefits. The most obvious being the cost, a high deductible means lower premiums. Employers will be paying less to insure their employees, which will not only add to profitability, profits should trickle down to employees one way or another. Employers will also have less state regulation to worry about, meaning they can provide the same benefits package across the US, regardless of workplace location. HSAs are also a significant part of HDHPs, and if provided, employers and employees receive certain tax advantages: tax-free interest, a lower tax-rate and tax-free withdrawals for medical expenses. Now, benefits like greater profitability and tax-advantages are tempting, but it is imperative that employers consider all of the factors before choosing an HDHP.