Today I want to discuss High Deductible Qualified Health Plans (HDQHP) that utilize what are known as Health Savings Accounts (HSA), the pros and cons, who they work well for and who should avoid them.
HDQHPs that can offer valuable premium savings as well as tax benefits are becoming much more common, especially as a choice for those who get health insurance from their employer.
I’ve been insuring myself and my family with a HDQHP for almost 20 years and also often recommend them to clients who get their insurance through the Affordable Care Act (ACA), aka Obamacare.
Let me first explain how HDQHPs work and differ from more conventional health plans most people are used to.
The key words in HDQHP are High Deductible. For a plan to qualify as a HDQHP, the deductible must be at least $1,700 for an individual and $3,400 for a family.
The biggest difference between HDQHPs and conventional plans is how cost sharing works. Conventional plans have fixed co-pays that may look something like this: $20 at a PCP, $50 at a specialist, $50 for Urgent Care, $150 at the Emergency Room, $5 for generic drugs and $35 for a brand name medication, etc. With HDQHPs, prescription drugs as well as all medical services, with the exception of those considered “preventative” as defined by the ACA, are subject to the deductible, meaning the full billable amount must be paid for services until the deductible’s been met. After that, services and drugs will either be $0, there will then be co-pays, or the cost will be reduced to the coinsurance, generally 10% to 20% on most plans.
Because of this, HDQHPs are generally not a good choice for those who take brand name drugs or see doctors or therapists often. Again, people on conventional plans have flat co-pays for “preferred brand” drugs ranging from $25 to $50. With HDQHPs, the full retail cost must be paid up to the deductible. With an average of $600 for a 30-day supply, any savings in premiums can quickly disappear.
The value of HDQHPs comes in two forms. The first is premium savings. Let me use an example of a 60-year old couple shopping for ACA plans in Allegheny County. The most popular conventional plans are $0 deductible Gold plans sold by Highmark and UPMC that cost $1,953/month and $1,910/month respectively. Gold HDQHP plans cost $265/month and $3,180/year less with Highmark, or $305/month and $3,660/year less with UPMC.
The second value in a HDQHP is the tax benefits they offer those who make deposits (contributions) into a Health Savings Account (HSA). Every dollar deposited into an HSA is tax deductible. The maximum allowable contribution to an HSA in 2026 is $4,400 to $5,400 for an individual and $8,750 to $9,750 for a family. In the example I’m using, this married couple is paying a combined 27% federal and state income tax. Making the maximum HSA contribution in 2026 would save them an additional $2,600 in taxes for a total of $6,780 to $7,260 in total savings compared to a conventional plan.
And when it comes to those HSA contributions, the money rolls over year after year and earns interest. And the best part is, if the contributions are used to pay for covered medical services and prescription medication along with out of pocket dental or vision expenses, it’s never taxed!
If there’s money left over at age 65, the funds can continue to be used on those same services or even to pay for Medicare Part B premiums. HSA contributions are the only investment in America that is never taxed both going in or coming out! I’ve probably saved around $30,000 in taxes by choosing an HDQHP and contributing the maximum to my HSA in the past 18 years. This is why I love them and so do financial advisors and accountants. Ask yours about them.
When it comes to HDHQP options at work, often the employer will subsidize a portion of your HSA contributions and make them on your behalf. That’s free money! When your next enrollment period comes up at work, if you’re relatively healthy and take no brand name medications, consider a HDQHP if it’s an option and make sure you’re aware of whether your employer participates in making contributions and how much they are. Once you have that information and plan options, as a courtesy and at no cost, one of our experienced agents will look over those for you and make a recommendation.
We also can evaluate ACA plans and compare conventional plans to the HDQHP option as well as make sure your application is filled out correctly. If you’re currently on an ACA plan and you bought it directly through Pennie or used another broker, you can immediately become a client of ours and start receiving all our outstanding services.
With questions or to make an appointment, give us a call at the office, 724-603-3403 or email me personally, Aaron@GetYourBestPlan.com.
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