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Qualified High Deductible Health Plan

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As an alternative to traditional self-funded and managed care plans, more companies are considering implementing a high deductible health plan, known as an HDHP, alongside an HSA or HRA. The qualified HDHP was part of the bill signed into law in 2003 as part of the Medicare Modernization Act. Its purpose is to lower health care costs by pushing plan members to analyse their health care decisions, while making insurance premiums more affordable to everyone. An HSA or HRA would be used with the HDHP to help pay for the deductible costs.

How Do HDHP Plans Work?

Employers can elect the type of HDHP offered to employees. An HDHP can allow for only in-network coverage, similar to an HMO, or allow for out-of-network coverage, similar to a POS or PPO plan. If a plan has in-network benefits only, members cannot go outside of the network once the deductible is met. For a plan that allows both in- and out-of-network benefits, members will usually receive better benefits by staying in-network. All in- and out-of-network benefits offered through the HDHP plan, including prescription drug coverage if offered, must apply towards the deductible.

Many, but not all, HDHP plans will actually cover preventive and primary care physician visits for a low copayment, though this is not necessary. HDHP plans are not meant to cover the initial health care costs such as preventive, specialist and laboratory visits. Instead they are meant to cover catastrophic events such as chronic illnesses or extended hospital visits. Plan policy holders are expected to pay medical office and facility payments till the deductible is met. Once members reach the out-of-pocket maximum, all medical services are covered at no costs.

What is the HDHP Deductible and Out-of-Pocket Maximum?

HDHP plan members have higher deductibles costs for their health care coverage, as the plan name suggests. The deductible is the amount of money a plan member must spend from his/her pocket before coverage kicks in. At least part of this deductible amount is covered by the HSA or HRA. As part of the legislation, there are minimum deductible limits set each year and adjusted for inflation, for a plan to qualify as an HDHP.

    Deductible Minimum
    Individual
    2008 - $1,100; 2009 - $1,150
    Family
    2008 - $2,200; 2009 - $2,300

The annual out-of-pocket maximum is the maximum amount of money the member pays before medical services are provided at no cost. The annual out-of-pocket maximum includes deductibles and coinsurance payments. Not included in the out-of-pocket maximum are lifetime maximum benefits, usual, customary and reasonable (UCR) amounts, existing benefit limits and pre-certification requirements. Like the HDHP deductible minimum, the out-of-pocket maximum is adjusted each year for inflation.

    Out-of-Pocket Maximum
    Individual
    2008 - $5,600; 2009 - $5,800
    Family
    2008 - $11,200; 2009 - $11,600

Benefits for Employers

Since HDHPs do not offer extensive health coverage, they offer lower premiums to the consumer. With the higher deductibles, it’s thought that plan members are less likely to see a physician unless it’s medically necessary. It’s also thought that patients will seek out health services that offer good value for the dollar. Using an HSA or HRA with the HDHP can help lower premium costs, while helping employees pay the large deductible amount, keeping costs down for everyone.

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