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A Closer Look – HDHP Deductibles and Out-of-Pocket Maximums

Nov 4, 2020 8:00:00 AM

At Bend, we’re confident when we say that an HDHP plus HSA combination can work for anyone, regardless of age, income level or health circumstance. But we also understand that while the HDHP/HSA combo continues to soar in popularity, many people are still hesitant to make the switch from their traditional PPO or HMO insurance plan.

Most often, their hesitation stems from the initial shock of seeing larger numbers on the HDHP side—specifically the higher deductible and out-of-pocket maximum that accompanies a high-deductible health plan. But when you take a closer look at what the deductible and out-of-pocket maximum amounts for an HDHP with an HSA really mean to you and your bottom line, you might just find that there’s no reason to hesitate, and that this open enrollment season is the perfect time to make the switch and start taking advantage of an HDHP and HSA in 2021 and beyond.

HDHP Deductibles and Out-of-Pocket Maximums that Qualify for HSA Eligibility

We get it—just the term “high-deductible health plan” can sound scary. Then you see the numbers that accompany your HDHP option and you get even more uneasy. You’re not alone in your feelings. But it pays to push past the initial unease and look further into what an HDHP/HSA option really means for you and your specific situation.

To start, let’s look at the dollar amounts that qualify an HDHP for HSA eligibility in 2021.

When it comes to minimum deductibles for HSA eligibility, an HDHP needs to have at least a $1,400 deductible for individual coverage or $2,800 for family coverage.

For out-of-pocket maximums, which equal the total amount you can possibly pay annually and include your deductible, copayments and coinsurance, the amounts for 2021 are $7,000 for individual coverage or $14,000 for family coverage. It’s important to note, these out-of-pocket maximums don’t mean this is the amount you’ll pay for every HDHP option—these are just the limits set by the IRS. Many HDHPs have a considerably lower out-of-pocket max than the IRS limit.

Don’t Let Fear Guide Your Decision–Look at All the Numbers

With coverage being a nonissue—since an HDHP with an HSA offers the same coverage as traditional PPO and HMO insurance plans, just with a higher deductible and out-of-pocket maximum—it comes down to the numbers to determine if an HDHP/HSA option is your best financial choice.

We’ve already covered running the numbers to see if an HDHP and HSA is right for you in a previous blog post. Be sure to check that out if you want an in-depth look into how to compare your health insurance plan options with a numbers-based approach.

For now, let’s focus on this key point—HDHPs offer a significant premium savings compared to traditional health plans. Most often, taking your monthly premium savings alone and contributing that to your HSA, plus any employer HSA contributions, if applicable, will set you ahead of where you’d be with a traditional insurance plan. That’s even with an HDHP’s higher deductible and out-of-pocket maximum.

Let’s run through a quick example of how an HDHP plus HSA can put you ahead financially.

An employee is comparing his health plan options this open enrollment for individual coverage—he has two to choose from:

  1. A traditional PPO health plan with a monthly premium of $105
  2. An HSA-eligible HDHP with a monthly premium of $30

Here’s how the plan comparison breaks out:

  HDHP with HSA Traditional PPO Plan
Annual premium $360 $1,260
Deductible $1,500 $250
Employer HSA contribution $750 n/a
Out-of-pocket maximum $2,500 $1,250
*Also has separate out-of-pocket maximums for prescription drugs based on 4 levels of copays, ranging from $600 all the way up to $6,850
True annual cost if you hit out-of-pocket maximum $2,110 $3,110
*Includes $600 for level 1 and 2 prescription drugs

So even in a “worst-case scenario,” the HDHP/HSA option provides $1,000 in savings annually compared to the traditional PPO plan.

Though at a glance it can be concerning that the deductible is $1,250 higher and the out-of-pocket maximum is also $1,250 higher with the HDHP/HSA option, the premium savings of $900 combined with the employer HSA contribution of $750, plus the fact that the HDHP/HSA has one combined out-of-pocket maximum with no separate breakouts for prescription drugs, more than offsets the “higher” numbers. And this doesn’t even take into account all the other tax advantages and benefits you receive by having an HSA.

One final point to consider when you evaluate the worst-case scenario—according to research by the JPMorgan Chase Institute, on average only 16% of Americans are impacted by a major healthcare expense within a year. Obviously it’s critical to evaluate your own specific situation and unique circumstances to make the choice that’s best for you. But the example above also shows that even if you have a large expense planned or possible, the HDHP/HSA option may very well still be your best, most financially sound choice.

Consider All the Costs Covered at 100%

Along with looking at how the numbers break out with deductibles, out-of-pocket maximums, premium savings, HSA contributions, tax savings and more, be sure to also factor in all the healthcare expenses that are covered immediately at 100% by your HDHP—meaning they’re not subject to your deductible and you don’t pay a dime out of pocket.

This is an important piece of the HDHP/HSA puzzle that many people overlook, and can represent a sizeable yearly savings for individuals and families alike. Preventive care, including applicable prescription drugs, along with care for many chronic conditions as defined by the IRS, all bypass your deductible and are covered free of charge. This includes care for everything from asthma and diabetes, to heart disease, hypertension and more. Telehealth services are also covered with no cost-sharing.

Make Your Money Work Smarter for You with an HDHP/Bend HSA Combination

Remember, pairing an HDHP with an HSA is widely recognized as being an extremely effective, affordable and tax-advantaged way for individuals and families to save and pay for current and future expenses while taking a more active role in their healthcare. Along with the lower premiums that come with an HDHP, HSA participants enjoy a triple tax advantage, flexibility of use, account portability, rollovers, investment opportunities and more.

It’s no wonder HSA-eligible plan enrollment is on track to grow more than 25% in the next year, and individual HSAs are on pace to exceed 30 million accounts by 2022.

Make 2021 the year you make your healthcare dollars work smarter for you by choosing an HSA-eligible HDHP. Then connect with us to open your Bend HSA and take the first steps to better financial wellness.

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