Should I Get a High Deductible to Lower My Health Insurance Premiums?

Jan 12, 2025

When shopping for health insurance, one of the most important decisions you’ll face is choosing between a low-deductible and a high-deductible plan. Premiums, the amount you pay each month for coverage, are typically lower for plans with higher deductibles. But this cost-saving feature can come with significant trade-offs that you’ll need to consider carefully before making a choice. In this article, we’ll explore the pros and cons of high-deductible health plans (HDHPs), help you determine if this is the right option for you, and offer tips on how to make an informed decision.

What Is a High-Deductible Health Plan (HDHP)?

A high-deductible health plan (HDHP) is a type of health insurance plan that comes with a higher deductible than traditional plans. The deductible is the amount you must pay out of pocket for healthcare services before your insurance begins to pay. In exchange for a higher deductible, HDHPs typically offer lower monthly premiums compared to plans with lower deductibles.

According to the IRS (Internal Revenue Service), for a plan to qualify as an HDHP in 2025, it must have:

• A deductible of at least $1,600 for individual coverage or $3,200 for family coverage.
• The maximum out-of-pocket costs (which include deductibles, copayments, and coinsurance) must not exceed $8,050 for individual coverage and $16,100 for family coverage.

While HDHPs can save you money on premiums, they require you to pay a larger amount upfront for most medical services until you reach your deductible.

The Pros of a High-Deductible Health Plan

1. Lower Monthly Premiums

The most obvious advantage of an HDHP is the lower premium. With healthcare costs continuously rising, many people find it difficult to afford the high premiums associated with traditional health plans. If you’re in good health, don’t anticipate frequent medical expenses, or if you’re willing to assume a higher risk, an HDHP may offer the opportunity to save on monthly premiums.

1. Health Savings Account (HSA) Eligibility

One of the biggest benefits of an HDHP is the ability to pair it with a Health Savings Account (HSA). An HSA is a tax-advantaged account that allows you to save money for medical expenses. Contributions to an HSA are tax-deductible, the funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free. In 2025, you can contribute up to $3,850 to an HSA for individual coverage and $7,750 for family coverage. Those over 55 can contribute an additional $1,000 as a catch-up contribution.

An HSA can help you manage healthcare costs in the long run by allowing you to save for future medical expenses. The money in your HSA rolls over year after year, and it’s yours to keep even if you switch health plans or jobs.

1. Potential for Cost Savings with Fewer Medical Expenses

If you’re generally healthy and don’t expect to have frequent doctor visits or expensive medical procedures, an HDHP could be a cost-effective choice. Since you’ll pay lower premiums, the savings might outweigh the higher deductible, especially if you don’t need significant medical care.

1. Access to Preventive Care

Under the ACA (Affordable Care Act), all health plans, including HDHPs, are required to cover preventive care at no additional cost to you. This means that regular check-ups, vaccinations, screenings, and wellness visits are covered without requiring you to meet your deductible first. This can help you stay healthy and catch potential issues before they become costly.

The Cons of a High-Deductible Health Plan

1. Higher Out-of-Pocket Costs

While the premium savings are appealing, the major downside of an HDHP is the higher deductible. If you face unexpected medical expenses, such as a serious illness or injury, you’ll be required to pay more out of pocket before your insurance kicks in. For individuals or families with chronic conditions or those who require regular medical care, the high deductible could result in significant financial strain.

Additionally, if you don’t have a large emergency fund or savings, the out-of-pocket costs could quickly become overwhelming. For some people, the potential to face these high costs is a dealbreaker, even if the monthly premiums are more affordable.

1. Limited Coverage Until the Deductible Is Met

With an HDHP, most services—such as doctor visits, prescriptions, and hospital stays—are subject to the deductible. This means that you’ll need to cover most of these costs yourself until you’ve met the deductible amount. While some plans may cover preventive services, non-preventive services like treatment for illness or injury typically won’t be covered until you meet your deductible.

1. Risk of Delaying Care

Because HDHPs require you to pay more out of pocket upfront, there is a risk that you may delay seeking necessary medical care, especially if you’re unsure about whether you can afford the costs. This can lead to untreated health issues, which could result in more serious problems down the road. Delaying care may end up costing more in the long run if health issues worsen and require more extensive treatment.

1. High Out-of-Network Costs

If your HDHP has a narrow network of covered providers or requires you to pay more for out-of-network care, you could face additional costs. Be sure to check whether your preferred doctors and hospitals are covered and understand the network restrictions before choosing an HDHP.

Who Should Consider a High-Deductible Health Plan?

An HDHP may be a good fit for individuals or families who:

• Are generally healthy: If you don’t anticipate needing frequent medical care, the lower premiums could result in significant savings over time.
• Have an emergency fund: If you have the financial capacity to cover high out-of-pocket costs in the event of a serious illness or injury, an HDHP can help reduce your monthly premium costs.
• Are willing to assume risk: If you're comfortable with the potential for high costs in exchange for lower premiums, an HDHP can be a viable option.
• Want to maximize an HSA: If you’re interested in saving for medical expenses while benefiting from tax advantages, pairing an HDHP with an HSA is a smart move.

Who Should Avoid a High-Deductible Health Plan?

An HDHP may not be the best option for individuals or families who:

• Have ongoing health issues or high medical needs: If you have a chronic condition or require frequent medical treatments, the higher deductible could quickly become a burden, outweighing the savings on premiums.
• Don’t have significant savings: If you don’t have the means to cover large out-of-pocket costs, an HDHP could put you in a difficult financial situation if you need extensive care.
• Prefer predictable costs: Some people prefer the stability of knowing how much their healthcare will cost each month, making a low-deductible plan a better choice.

Conclusion

Choosing a high-deductible health plan to lower your premiums can be a smart financial decision for some, particularly if you’re healthy, have an emergency fund, and want to take advantage of an HSA. However, the higher out-of-pocket costs associated with HDHPs may not be worth the savings if you require frequent medical care or aren’t prepared to handle the potential expenses.

Before making a decision, carefully assess your healthcare needs, financial situation, and risk tolerance. It’s always a good idea to compare both HDHPs and traditional plans to determine which option offers the best value for your unique circumstances.

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