Unpacking the HDHP: The Details behind the High Deductible Health Plan

Growing in popularity, a High Deductible Health Plan (HDHP) can serve as a great benefit option for some employees. Like all benefits coverage, each plan and its compatibility with your needs is entirely unique to you. With your health habits in mind, consider how the HDHP could work in your life.

About that Deductible…

Like the name infers, the HDHP has a notably higher annual deductible than the traditional PPO plan. In a PPO plan, patients pay pre-determined copays for things such as ER visits, doctor’s visits and prescriptions. An HDHP plan does not include copays, which means that an employee is responsible for the total cost of prescriptions, doctor visits and medical events up to the deductible (except for preventative exams and care, which are 100% covered under both plans). However, HDHPs are designed to offset the total out-of-pock costs in several ways.

Premium Costs:

Because an employee would cover the total costs of medical events up to the deductible amount, monthly premiums for the HDHP are lower than PPO premiums, meaning more money in your paycheck. This would not offset the total cost of the higher deductible, but if you do not require frequent doctor visits, high-cost prescriptions, or have large medical events in the future that would lead to reaching your deductible, the extra savings in premiums could be a benefit.

Health Savings Account:

A Health Savings Account is the primary way in which you can offset the deductible. It is set up much like a savings or investment account as employees make contributions to the account on a pre-tax basis. In addition to putting in your own money, OUHSC will make an annual contribution to the account as well. This money can be used to pay for doctor’s visits, prescription costs and many other medical expenses. HSAs are triple-taxed advantaged as contributions are made tax-free, earnings are not taxed, and reimbursements for eligible are tax-free.

Money that stays with you! Another advantage to an HSA is that money rolls over from year-to-year, which means you accumulate more over time between your pre-tax contributions and the contributions from OUHSC every year. The HSA not only stays with you, it is transferable if you leave the University. You can transfer the money from your existing HSA into another, or to another investment account. 

How it Adds Up – One Case Study:

Jared is single, in good health, rarely visits the doctor and has few prescriptions needed annually. Aside from preventative exams and care, he does not anticipate extensive healthcare needs in 2019. He plans to contribute to his HSA every year, because he knows that the money will stay in his account as he needs it, or he can take it with him if he leaves the University. 

  Contribution  Amount 
  Jared’s Annual Pre-Tax Contribution $2,000 (maximum employee-only contribution is
$3,000 annually)
 +   OUHSC’s Annual Contribution $500
  Total Contributions: $2,500 

  Deductible Amount  $3,000
 Total Contributions:  $2,500
   TOTAL out-of-pocket annual costs (if entire deductible is met): $500 

Keep in Mind:

How much are your annual healthcare costs?

If you habitually reach or come close to the deductible amount of a traditional PPO plan, the HDHP may not suit your needs. If you rarely approach your deductible amount, visit a doctor or require long-term prescriptions, you may consider the HDHP for its lower monthly premiums, your self-directed pre-tax contributions to and HSA, and the OU contribution that can offset
expenses.

How much can you contribute?

Do you see yourself being able to regularly contribute to an HSA? The more you save year-over-year, the more you will have to cover any unexpected medical event.

Can you plan ahead?

HSA funds are only available once they are deposited in the account, so it would be wise to plan your contributions around when you would want them available to you. The OUHSC contribution is made every pay day.

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