The term “high deductible health plan” probably sounds pretty self-explanatory. But it’s actually an official term that the IRS defines, it doesn’t just mean any health plan with a high deductible. High deductible health plans, often referred to as HDHPs, have to follow three rules:
- The deductible has to be at least a certain amount, established each year by the IRS. For 2021, the minimum deductible is $1,400 for a single person, and $2,800 for a family, both of which are unchanged from 2020. (Family HDHP coverage just means that the plan covers at least one other family member in addition to the primary insured.)
- The out-of-pocket maximum can’t exceed a certain amount, established each year by the IRS. For 2021, the maximum out-of-pocket on an HDHP is $7,000 for a single individual and $14,000 for a family.1 These amounts are higher than the respective $6,900 and $13,800 limits that applied in 2020, but quite a bit lower than the general maximum out-of-pocket limits that apply to plans that are not HDHPs.
- The plan cannot pay for any non-preventive services before the minimum deductible is met. This means non-preventive office visits and prescriptions must be paid in full by the patient (but at the health plan’s negotiated rate, which is generally lower than the amount the medical provider bills). So a plan with pre-deductible copays for non-preventive services is not an HDHP, even if it meets the deductible and maximum out-of-pocket requirements (that’s because copays involve the patient paying a set amount—$25 or $50, for example—and then the insurer pays the rest of the bill; this isn’t allowed for non-preventive care on an HDHP until the member has met the minimum deductible). But the IRS has expanded the list of services that can be considered preventive care under an HDHP, and is also allowing plans to provide pre-deductible benefits for COVID testing and treatment while still keeping their HDHP status
A high deductible health plan is not the same thing as a catastrophic health plan. “Catastrophic” is a term that was used in the past to describe any health plan with high out-of-pocket costs, but the ACA created a specific definition for it. Catastrophic health plans are only available to people under the age of 30 and to people who have hardship exemptions from the ACA’s individual mandate. And catastrophic plans can never be HDHPs because they cover three non-preventive office visits pre-deductible and have out-of-pocket exposure that’s higher than the limits imposed for HDHPs.
Cosmo Insurance Agency is a full-service independent insurance agency based in Hackensack (Bergen County) and Lakewood (Ocean County), New Jersey that offers an all-encompassing range of insurance options for both individuals and businesses. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating our knowledge of the insurance guidelines for healthcare, employee benefits, life insurance, self-insurance, dental, disability, and long term care insurance, we keep our clients up-to-date with affordable plans that cover all their specific insurance needs.
