Affordable family health insurance is a huge consideration during open enrollment for 2021. And rightfully so. The average family shells out about $500 a month for premiums on employer-sponsored health plans. Those premiums don’t include out-of-pocket expenses like deductibles, coinsurance, copays, and anything else you need that’s not covered by the plan. It’s no wonder that patients often feel overwhelmed while choosing medical insurance during open enrollment.
When thinking about how to choose a health care plan, resist the temptation to pick something without researching all of your options. Even though reading up on health insurance plans for families isn’t the most exciting activity, doing so will help you save money and — most importantly — get the best care for your family. One such plan you might research is a high-deductible health plan (HDHP). Despite the misleading name, this type of plan won’t necessarily cost you more. And when you pair it with a health savings account (HSA), it can save you money.
Understanding High-Deductible Health Plans
The health care industry has changed rapidly, especially in how insurance companies get paid. Today, individuals and families heavily shoulder any risk. Because of that, HDHPs are becoming more popular. These types of plans offer families low-cost or no-cost preventive care at low premiums. However, services that don’t fall under the preventive umbrella usually aren’t covered until a per-person or per-family deductible cap is met.
As you might imagine, choosing an HDHP can be a bit of a gamble. On the one hand, the low premium means you save money in the short term. But what happens in an emergency? Most parents have experienced the dreaded trip to the emergency room. Even if your kid’s stomach pain turns out to be gas, you still have to pay the bill — which could be exorbitant if you haven’t already met your deductible.
Does this mean an HDHP isn’t the right insurance option for families? Not at all, especially when it’s paired with an HSA. These are tax-free investment accounts that can be used at any time without penalty.
You can send a portion of your income (without paying taxes on it) into the HSA, where it will accrue (tax-free) until you need to spend it on health-related expenses like over-the-counter medications, pediatric care products, prescriptions, eyeglasses, and much more (and those withdrawals aren’t subject to taxes). And while retirement might still be decades away for you, your HSA will convert into a normal IRA that you can use during retirement penalty-free when you turn 65.
Before you decide to pick a health plan with a high deductible and an HSA, take a moment to think about your family’s situation. If your child has significant health demands, the advantages of high-deductible health plans might not outweigh the extra financial burden. But if everyone in your household is relatively healthy, you can comfortably consider an HDHP.
Will you occasionally have an outlier year where everyone gets sick and you take a few emergency room trips? Probably! But if you’ve been squirreling away funds in your HSA and using it efficiently, you’ll come out ahead in the long run.
How to Choose a Health Care Plan During Open Enrollment for 2021
Is your medical insurance open enrollment period in full swing or on the horizon? Below are a few questions you should ask before committing to an HDHP — or any health insurance plan — for your family:
1. Does this plan provide low-cost or no-cost preventive health coverage?
It’s important for you and your family members to get the preventive care you need to stay healthy and catch problems early. Scour through any plan you’re considering to ensure it covers things like annual physicals, wellness visits, age-related screenings, immunizations, and related services. Knowing whether your plan covers these appointments will give you peace of mind.
2. Does this plan provide coverage in areas important for my family?
Historically, insurance options for families have had gaps in coverage around things like mental health. But the need for coverage in those areas is increasing — anxiety disorders, for example, affect about 18% of adults and more than 25% of children. If someone in your family needs mental health services like counseling, you’ll want to know whether the plan you’re considering covers them. If not, you’ll have to pay for those expenses out of pocket or with your HSA funds.
3. Am I factoring in my long-term health care needs?
Medical issues and bills are why two-thirds of people file for bankruptcy, which is why it’s so important to pick a health plan that offers the best value while accounting for your needs now and in the future. Once you reach age 65, the average cost of health care is more than $11,000 per year. If you’ve invested money in an HSA during your working years, however, those funds can help you cover health care costs and avoid major financial problems.
4. Will my employer contribute or match my contributions to an HSA?
To add to the advantages of high-deductible health plans for families, some employers contribute to their employees’ HSAs — which means more money in your pocket for health care costs with minimal effort on your part. Be sure to check whether your employer offers this benefit before you pick an insurance option for your family during open enrollment for 2021.
Is an HDHP good for family needs like yours? Only you can decide. Do your research on the disadvantages and advantages of high-deductible health plans, and you might be able to hold on to more of your hard-earned money while providing your loved ones with the care they deserve.