Are high deductible health insurance plans a good deal for you?

One of the biggest shake-ups in recent years is the growth of high deductible plans, which offer lower monthly premiums but require consumers to pay most initial medical costs out of pocket before the plan’s coverage kicks in. While their cheaper premiums may look like a bargain, consumers risk paying much more if they have unexpected illnesses or failed to budget well for more routine care.

Here’s what you need to know when it’s time to choose a health insurance plan.

How are high deductible plans different from other options?

Most Americans are familiar with the more traditional “preferred provider organization” (PPOs), which offers a broader network of participating medical professionals and a lower deductible in exchange for a higher monthly premium. These may be a good choice for people who’ll need more than routine medical care. They also tend to have lower co-payments and don’t always require patients to seek their primary doctor’s approval to see specialists.

Some employers also offer the option of a health maintenance organization (HMO), which typically charges lower premiums but imposes more restrictions on access to specialists, with primary care doctors sometimes acting as “gatekeepers.”

Both types of plans have lost ground to high deductible plans. In 2006, only 4 percent of workers were covered by them; by 2024, the share was 27 percent, according to the nonprofit health policy research organization KFF. In that same time, the share of people in PPOs slipped from 60 percent to 48 percent, while those in HMOs dropped from 20 percent to 13 percent.

Why can high deductible plans be risky?

Many Americans have had sticker shock in recent years because deductibles have risen across most types of plans. For HMO or PPO plans, they average around $3,000 a year for family coverage (when out-of-pocket expenses of all members count against a deductible) compared to almost $5,000 for high deductible plans.

The ACA established federal requirements for most health plans, including high deductible ones, to ensure the most basic routine preventive services (such as mammograms and colorectal cancer screening) don’t require co-pays. But given the threshold for coverage under high deductible plans, enrollees are more tempted to curtail or delay other types of preventive care and elective treatments to save money, research has shown.

In other cases, consumers might hold off on elective treatments and screenings until later in the year, after they rack up other health expenses to reach their deductible. This can be especially risky for those who have chronic conditions such as heart disease and diabetes, potentially leading to missed opportunities for earlier intervention.

Given that these plans can result in hefty out-of-pocket bills, high earners are in a better position to fund their medical care, while those on lower incomes have more at risk, said Sabrina Corlette, co-director of Georgetown University’s Center on Health Insurance Reforms. She encourages “caution” before signing up — despite the allure of lower premiums.

That’s especially the case for the millions of Americans who are cash-strapped even for basic necessities. A 2022 Federal Reserve survey suggested that about 37 percent of adults in the United States couldn’t fully cover an unexpected $400 expense with either cash or its equivalent, such as a credit card.

Why have health insurance deductibles become so expensive?

Deductibles have been pushed up in part by the broader increase in drug prices. Another driver is the consolidation of the health care system. Larger systems can demand higher prices, and because employers want to offer plans that include major hospitals in their region, hospitals have more clout in those price negotiations, Corlette said.

“Employers and insurance companies turn around and pass those costs on to consumers,” she said. “That is done both in the form of higher premiums, but also through higher deductibles and other forms of cost sharing.”

The consolidation trend has caught the attention of the Justice Department’s antitrust division, the Federal Trade Commission and the Department of Health and Human Services, which have launched a joint inquiry into how mergers and acquisitions, especially by private equity, are driving up medical costs.