High-deductible plans have become more attractive over the past decade as health care costs and premiums have risen, experts say. Nearly 30% of workers benefit from health insurance enrolled in a high deductible projects in 2023, compared to 20% in 2013.

For 2025, the Internal Revenue Service defines high-deductible plans as those with annual deductibles of at least $1,650 for individual coverage and $3,300 for family coverage, or that have annual spending limits of $8,300 for individuals and of $16,600 for families.

A deductible is the amount one pays for covered medical services before the insurance plan begins to pay in part for them. Once the maximum plan limit is reached, the insurer fully covers the rest of the covered medical expenses. Out-of-pocket costs include deductibles, copays, and coinsurance, but not premiums.

Insurers offer high-deductible plans in part because they know that people who have to pay higher deductibles are less likely to seek medical care, said Leighton Ku, a professor in the Department of Health Policy and Management. Health at George Washington University. “Through this, you reduce health care costs.”

How High Deductible Plans Work

High-deductible plans come with lower monthly premiums, meaning people pay less to have insurance. But if they have a serious medical emergency or require surgery, they can end up paying thousands of dollars before their insurance starts paying.

High-deductible plans typically fully cover preventative care services, such as annual physicals, mammograms, colorectal screenings and vaccinations. But all other medical expenses are the responsibility of the insured until the deductible is reached. Then, the policyholder typically must pay a copayment or coinsurance for doctor visits and other services, with the health insurance company paying the rest, until the plan’s maximum amount is reached.

“So the trade-off is that you get more insurance coverage with a regular health insurance plan than you do with a high-deductible health plan,” Ku said. “On the other hand, the high-deductible health plan generally has a lower monthly premium.”

What are health savings accounts?

High deductible plans often come with the option of opening a health savings accountor HSA. Money deposited in an HSA can be used to pay qualified medical expenses such as deductibles, copays, and coinsurance, but not premiums. The benefit is that this money is not subject to federal income tax, potentially saving people money.

“If you’re in a bracket where you pay a decent amount of income tax, an HSA is an incredible tax-advantaged savings vehicle that you can only access if you have a high-deductible plan” , said Tom Baker, a professor at the University of Pennsylvania’s Penn Carey Law School who has expertise in health insurance policy.

Any unspent HSA money at the end of the year carries over to the next year. HSAs sometimes offer interest, depending on the type offered by an employer or selected in the federal marketplace.

Who is best for a high deductible plan?

For people who don’t anticipate needing significant medical care, a high-deductible plan may be a wise option.

“What makes it difficult is you don’t necessarily know in advance how much medical care you’ll need,” Ku said.

Ku remembers once reading a guide on how to choose one of the many health plans offered by his employer, which at the time was the federal government. “One of the questions was, ‘Do you plan to get cancer in the next year?’” Ku said. “I don’t plan on getting cancer in the next year, but I don’t know. You know, maybe. God knows. I hope not!

“You’re taking a gamble if you buy a high-deductible health plan, because you’re sort of saying, ‘I don’t think I’m going to get sick at all, or… not very sick, in the year to And if, in fact, you have to go to the doctor – even worse, if you have to go to the emergency room or hospital – then you will have to pay the entire…deductible.”

Ku compared choosing a health plan to buying a car: “Should you buy a small car that may not survive a car accident, or a larger, heavier car, more expensive, uses a lot more fuel, but is probably safer. ?”

If you need a lot of medical care, it makes more sense to get a HMO or PPO plan compared to a high-deductible plan, Ku said. HMOs, or health maintenance organizations, tend to have lower premiums but may have deductibles and limited out-of-network coverage. PPOs, or preferred provider organizations, allow people to see doctors in and out of network and don’t require referrals to specialists, but they have higher premiums.

Ultimately, “the best situation for a high-deductible health plan is a high-deductible health plan, plus an HSA, for a young, wealthy, healthy person,” Ku said.

What are the risks associated with choosing a high deductible plan?

With a high-deductible plan, people who have unexpected health care costs, such as a catastrophic event or a cancer diagnosis, must pay all of those costs until they meet their deductible.

“Your medical payments over the course of the year are more lump sum, and that doesn’t work for everyone,” Baker said. “There might be a lot of people who could save money with the high deductible plan, but it would mess up their household budget, because there will be a few months after the plan year begins where you may have to -find a few thousand dollars to pay for something. For most people, that’s real money.

People who choose high-deductible plans need to think about how they will manage financially if they have to pay the deductible — and perhaps all at once — in the event of a major medical event, Baker said.

“The money you save on your premiums, you should put in a rainy day fund for when you have to make a deductible payment,” Baker said.

Confused about different health plans? These people can help

“I’m a professor in this field and I find all the time that I don’t understand how my own health insurance works,” Ku said.

People who have health insurance through their employer can talk to their employer’s human resources or benefits departments about it.

The federal market, healthcare.govdirect people to three resources for help when applying for insurance: assistants, agents and brokers.

Assistants are trained and certified by Marketplace to help people apply and enroll in a Marketplace health plan or apply for free or low-cost coverage through Medical help or the Children’s Health Insurance Program. Assistants must be impartial.

Some agents and brokers are trained in the health insurance marketplace and licensed in different states to sell marketplace plans.

Agents work for specific insurance companies, are paid by the companies they represent, and can only sell plans for the companies they work for. This means they have a lot of expertise in the plans they sell, but they are motivated to sell the plans of the insurers they represent.

Brokers are not tied to specific insurance companies. Brokers represent the people who buy insurance and generally have broader expertise on various insurance plans. When a broker sells a plan, the company pays them a commission.

The Pennsylvania Health Insurance Marketplace, Pennyhelp people find certified assistants and brokers. Pennie also offers a “savings calculator” to help people choose a plan. The New Jersey market, GetCoveredNJhas a customer service center who offers help and also connect people to brokers and certified assistants.

When is registration open in Pennsylvania and New Jersey?

Registration for plans purchased on the Pennsylvania and New Jersey public marketplaces is open beginning Friday, November 1. It ends on January 15 in Pennsylvania and January 31 in New Jersey.