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HDHP or Co-Pay Plan What Gives?

There isn’t really a “Best” plan type as most health plan decisions and outcomes are dependent on too many factors for one size fit all solutions. 

At Orion Financial Services we answer a lot of questions about health insurance plans. One of the most common one’s regarding group insurance is “Which plan is better for me: a high deductible health plan or a co-pay plan? “

This question does not have a simple answer. It will require you to think about what your individual needs are and for you to know what your budget and financial outlook is. 

Our answer is and will always be it depends on your needs as a plan member for your overall and unique health and how much of the risk you are looking to transfer. 

Let’s look at each item and review how it could benifit you.

HDHP Plan

Details:

  • Once you meet your annual deductible you will have a pre-agreed amount of what is called “Co-Insurance” to pay for any medical costs in excess of the deductible. Co-Insurance is a fancy insurance term for cost sharing and is typically illustrated as a percentage agreed between you and your insurer that you will pay of all costs after the deductible. This is typically capped to a maximium out of pocket cost amount per year after which your insurer is responsible for all costs. 

    Example: of this is that you have met your $3,000 Deductible this year and go to see a specialist which bills you $200 for services. You have 50% co-insurance and as such you are responsible for half of that bill ($100) and any other bills until you reach you maximum out of pocket. 
  • Most HDHP’s have a set deductible that is higher than co-pay plans which is the amount of risk you will retain as a subsciber/insured BEFORE your insurer will help you cover costs. 

Who do HDHPs make sense for?

  • It depends but these plans work well for people who know how much medical care they require on an average year and know that they will meet their deductible early in the year. It also works for those who can afford to pay the deductible sometimes in one lump sum or over the course of a year by retaining the risk and paying for services up to the deductible out of pocket.
  • A HDHP may also make sense for a person who does not go to the doctor often as the agreed rates and co-pays cap the actual cost of services provided to a minimum. These plans typically will likely have lower monthly premiums. 

Perks:

  • If you have a HDHP, you are often eligible for a health savings account (HSA). This is essentially a savings account where you can put money aside to spend on qualified medical expenses, including deductibles. The money you deposit into a health savings account is tax advantaged, meaning that you can deduct contributions that you make to the account on your taxes. Reimbursements for qualified expenses made from the account are also not taxed.
  • Lower monthly premiums than co-pay plans.
  • You may feel like the insurance is “full price” and you are not saving anything out of pocket, That is because you are not. You are retaining the cost of healthcare up to your deductible with the advantage of getting negotiated rates with medical providers. That means you’re charged the same amount the insurance company would pay rather than the list price for medical care that you would pay if you didn’t have any coverage. 

Co-Pay Plan

The details:

  • The co-pay plan is much different than a HDHP primarily because your risk retention amount is far less. Co-Pay plans are what are known as First Doller coverage plans. These plans will pay providers less or cost subscribers more or both. You may not have a deductible or co-pay on some services. The insurance company starts covering you day one without you having to pay anything other than the agreed co-pay schedule for services. The insurer sets fixed dollar amounts (called “co-pays”) that you’re required to pay when you go in for a medical service. As an example, your plan could have a $20 co-pay for primary care doctors, $40 for specialists, and $15 for generic drugs. When you go to the doctor or refill a prescription, this is the amount you’ll pay, subject to any deductible or co-insurance. 
  • Co-pay plans will usually have a co-insurance (the cost sharing with the health insurance company) on services that cost more, like hospital stays, maternity care, x-rays, mri’s, etc. It is important to check all details of the plan to get the specifics.
  • Co-pay plans will still have a deductible (in some cases it will be $0) and out-of-pocket maximum. Co-pays usually do not count towards the deductible, but they do count towards your annual out-of-pocket maximum. If you reach your out-of-pocket maximum, the insurance company pays 100%, eliminating the need to pay your co-pays. 

Who do co-pay plans make sense for?

  • If you want first dollar coverage and do not suffer from a chronic illness which require a high service utilization a Co-pay plans may be right for you. 
  • These plans also make sense for people who don’t have the budget to pay the full price for a medical bill or prescription out-of-pocket or for those who are willing to pay more each month for the peace of mind in knowing about how much they’ll pay when they visit the doctor.

Perks:

  • Peace of mind knowing how much you’ll pay when you visit the doctor.

In this market with the healthcare exchanges and the high cost of healthcare. It is best to understand what you use, how you may use it and plan for the worst case scenario.