High deductible health plan: How it works

You may have heard of high deductible health plans. They have a reputation for saving you money on your overall health care costs. How do they do this? It starts by knowing the three phases of cost sharing.

Phases of cost sharing

1. First, it's the deductible phase. In this phase, you pay the entire cost of your care.
2. Next is the coinsurance phase. That's when you pay some and the insurance pays some.
3. The last phase is the out-of-pocket maximum. When you hit that phase, insurance pays the costs in full.

Using an HSA with a high deductible plan

The most important feature of a high deductible plan is right in the name. With these types of plans, you begin by paying most of your expenses in the early part of the year. And you typically do that by using money you've stashed away in a health savings account (HSA). Most HSA accounts are tax-free, so they help you save money in the long run.

Once you've used enough health care to meet your deductible, you move into a new phase of coverage where your health plan picks up a significant portion of the bill.

Another point worth mentioning is monthly premiums. This is the cost you pay each month for your health plan.

Compare high deductible plans with copay plans

In the video above, you’ll better understand how a high deductible health plan works and if it's the right option for you.

You can also get more details on copay health plans, another popular choice. Or, compare the two and learn how to choose a health plan.

Note: Grandfathered health plans offered by some employers cover preventive care differently than these illustrations. See your benefit plan documents for coverage details