What is a high deductible health insurance policy?
A high deductible health plan (commonly referred to as an HDHP) is a health insurance plan in which a high minimum deductible must be met before any coverage or claims are paid out. In the US, what constitutes a "high deductible" varies from year to year and depending on whether you're single or have a family.
Now, to understand the effect of this "high deductible," we first have to understand what a deductible is. A deductible is the amount an insured must pay before any coverage is granted by the insurance company.
High deductible insurance policies reduce the number of claims an insured can make. For example, if you have a deductible of $10,000, you would not make a claim for a loss valued at $1,000 because you would be effectively throwing away $9,000. This means the insurance companies have fewer claims to deal with and their total dollars paid out would be lower. The downside here is that many people will forgo medical treatment because of this high deductible.
However, it's not all bad news. The main benefit of having a high deductible plan is that, for the reasons discussed above, the premiums will be much cheaper, making it a more affordable option for people who might otherwise not be able to afford health coverage.
Written by Jacques Wong
Jacques grew up around the insurance industry and began actively participating in 2013. Since then, he has gotten a Level 2 license, won Insurance Council of BC awards in 2015 and 2020 for academic excellence in the insurance licensing courses. He educates insurance professionals through PNC Learning and as a Thought Leader at ReFrame Insurance.
In his day job as an insurance broker, he helps businesses with creative risk management solutions and strategic advice when it comes to insurance.
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