Health Insurance
August 19, 2010 4:19 PM   Subscribe

What is the difference between a High Deductible Comprehensive health insurance plan and a Traditional Comprehensive insurance plan?

New job, new health plan. Can someone please explain the differences between these two and why someone would pick one over the other. I'm mid twenties and healthy, no medical issues/conditions.

In addition, I know a Health Savings Account can be used in conjunction with a High Deductible plan and under the health plans they have these two options listed under Reimbursement Accounts:

1. Health Flexible Spending Account: No Coverage Health FSA


2. Health Savings Account: No Coverage Health Savings Account

Can anyone describe what these might signify and if I need to put any consideration into those as well? Thanks for the help in advance!
posted by modoriculous to Health & Fitness (7 answers total)
You are using the words "high deductible comprehensive" and "traditional comprehensive" like they are something specific with a global meaning. These are just titles someone put on the paperwork. The difference between the two is outlined in the rest of your paperwork. Usually, there is a table that shows what the deductible is for each plan, and what percentage of different things is covered.

By title alone, I would guess the first one has a higher deductible. Beyond that... you'd have to tell us what the chart says. My personal way to choose is to find the coverage that has the highest deductible, but still covers anything I believe I could not afford at all. The choice depends on the details of the two plans, and your personal finances.
posted by Houstonian at 5:03 PM on August 19, 2010

A high deductable policy pays for mosly nothing (except annual checkups) until you reach your annual minimum ($3000). You're supposed to pay for qualifying expenses out of your health savings account. You contribute to your HSA before taxes, so it reduces your total taxation. The money in your HSA is yours forever, so it has similarities to a 401k.
At my company, the flex spending account is for predictable health expenses that do not contribute to your deductable, like dental and eyeglasses. This money is a "use it or lose it" deduction. If you don't spend it during the year, it simply goes away.
There's no reason for a healthy 20 something to not do the High deductable/HSA program. You can bank some serious cash against a future disaster. If nothing happens, you've still got the money.
It's also the cheaper insurance.
Don't be tempted to skip the HSA. You can really get into trouble without it.
posted by Carmody'sPrize at 5:10 PM on August 19, 2010

High deductible health plan has a specific meaning. Typically they're marketed to young, healthy people because they're only really useful if you have an unexpected, costly illness or trauma. They're not very useful if you have chronic health problems or expect to see a doctor frequently because you'll end up paying a very large amount of money before you reach the deductible. The annual out of pocket maximums are also very high.

High deductible plans often have high copays or coinsurance rates. Basically a high deductible plan is a way to keep from going completely bankrupt if something catastrophic happens. However, you may still end up bankrupt if you can't afford the out of pocket maximum (which can be as high as $5,950 for a single person) or coinsurance, so bear that in mind.

A comprehensive plan is what you probably normally think of as insurance. You pay more each month but you typically don't have to pay as much if you actually need services, at least compared to a high deductible plan. The deductible and out of pocket maximum should be lower than under a high deductible plan.

A medical flexible spending account is a way to set aside part of your earnings for medical expenses. The money you set aside is not subject to payroll tax, which can result in a significant savings. However, you can only spend it on certain medical expenses. One kind of expense you can spend it on are health insurance deductibles, copays, and coinsurance (but not the insurance premiums). So if you know you're going to spend a certain amount of money each year on copays (e.g., for medication you take continuously), then you can use a medical FSA to pay for that more efficiently than using normal, post-tax income. One disadvantage is that medical FSA's are "use it or lose it." If you don't use it by the end of the year, it goes away.

A health savings account is like an FSA except you have to be on a high deductible plan to use it. Unlike a flexible spending account, an HSA is not 'use it or lose it' and the amount you've deposited will roll over from year to year. If you spend the money on qualified medical expenses, it remains tax free. If you use it for other things, then it's taxed as income plus a 10% penalty. The penalty is waived if you're over 65 or are disabled, however.
posted by jedicus at 5:13 PM on August 19, 2010 [3 favorites]

I spent several years on a high-deductible plan that was labeled "consumer driven". With an ordinary high-deductible plan, as I know them, you have low premiums but have to pay out-of-pocket for many routine items. They probably pay for preventive care (cholesterol checks, and so forth) and have pretty good prescription coverage. But beyond that, it's a glorified catastrophic medical policy. Having the HSA (or Health FSA; I haven't a clue about how they're different) allows you to essentially spread out your out-of-pocket costs by having a payroll deducted amount (of your choosing) deposited directly into your HSA.

If it's a consumer-driven plan, though, they essentially give you a substantial portion of your deductible up front. That money is used to pay your out-of-pocket expenses (but at "list" price b/c your real insurance doesn't kick in until you meet your deductible) before you ever have to shell out a dime beyond paying your premiums. Once you use up the slush fund (as I like to call it; they have a boring and forgettable name for it) and pay your portion of the deductible, then the real insurance starts paying out. If you have a healthy year and don't use up your slush fund, most policies will roll over the unused portion.
posted by DrGail at 5:20 PM on August 19, 2010

There's no reason for a healthy 20 something to not do the High deductable/HSA program.

Sure there is. If you don't think you can save enough money to cover the high deductible, high out of pocket maximum, and (often) coinsurance of some future disaster, then a high deductible/HSA plan isn't a good idea.

All insurance is a gamble, but a high deductible/HSA plan is a different kind of gamble than traditional insurance. With traditional insurance, if you 'lose' (i.e., never get sick), then you're out your higher premiums, but you paid those at a steady, presumably affordable rate. Plus, hey, you're not sick. With a high deductible/HSA plan, if you 'lose' (i.e., get sick before you've saved enough to pay for the high deductible, out of pocket maximum, and/or coinsurance), then you're bankrupt and sick to boot. Indeed, since the expenses were high enough you couldn't pay them, you're probably very sick indeed.

If you're not risk averse, make enough money to rapidly accumulate a large HSA balance, or simply can't afford the higher premiums of a traditional plan, then a high deductible/HSA plan may make sense. If you're risk averse, then a traditional plan may still make sense even if you're young and healthy.
posted by jedicus at 5:24 PM on August 19, 2010 [2 favorites]

In our case, the high deductible was a $3000 deductible with substantially lower premiums; the "traditional" plan was a $1000 deductible with much higher premiums. They both covered the SAME once you were to the deductible (5% - 20% copay, depending, up to $6,000 or something like that). We did the math and in any year we didn't fall into a weird "donut" space, we would come out well ahead with the high deductible plan.

The catch is, you must save enough money to pay the high deductible, which not everyone can do. We had a HCSA and an FSA, but were capped on how much could go in the two accounts, which came to around $2500 or something. But what we did was put away immediately the $3,000 to get to the deductible, in a high yield, no-touchy savings account, and then saved up to get to the out-of-pocket ceiling too. That way even without the HCSA and so forth, we'd know we could cover our deductible and (eventually) our out-of-pocket maximum.

Our plan covers, for free, a comprehensive physical for each of us each year, and all vaccinations. Most years that's all we need. But being young people of spawning capacity, we knew that some years we'd have babies, in which case we'd get to the deductible super-fast. (My ob/gyn cost was $2850 on the first one, plus labs are billed separately, so we were above the $3000 threshhold before we even got to the hospital to deliver.) As we have children, we'll have to re-evaluate which plan is best for us.

Anyway, this is why you've got to actually LOOK at your plan, and it's worth doing a little math to say, "Okay, so what if my bills come to $200 this year? What if they come to $3500? What if they come to $11,000? What if they come to $60,000?" And see how that math works out for different costs. If you can save the deductible and the high-deductible coverage is GOOD coverage once you're past the deductible, it is PROBABLY worth it for you as a young, healthy person.
posted by Eyebrows McGee at 5:59 PM on August 19, 2010 [1 favorite]

Response by poster: Once again, all great answers! Thanks everyone for helping me out. The coverage page at work did have a side by side comparison but it was still difficult to see what the difference was which was ultimately why I needed some outside assistance. Thanks everyone!
posted by modoriculous at 4:50 AM on August 20, 2010

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