The final weeks of the year offer an opportunity for many people to consider their health insurance options for the upcoming year. Open enrollment for plans sold on government-run marketplaces begins Friday, Nov. 1, in most states, including Pennsylvania and New Jersey. And many employers allow their workers to enroll in health plans – or renew or change them – at this time, too.
Many people may consider high deductible health insurance plans that offer lower monthly premiums – the amount one pays the insurance company for the policy – but have higher deductibles than traditional HMO and PPO plans.
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High deductible plans have become more appealing over the last decade as health care costs and premiums have risen, experts say. Nearly 30% of workers with health insurance enrolled in high deductible plans 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 have annual out-of-pocket spending limits of $8,300 for individuals and $16,600 for families.
A deductible is the amount one pays for covered medical services before the insurance plan starts to partly pay for them. Once the plan's out-of-pocket maximum is hit, the insurer fully covers the remainder of covered medical costs. Out-of-pocket expenses include deductibles, copays and coinsurance, but not premiums.
Insurers offer high deductible plans in part because they know people who have to pay higher deductibles are less likely to seek medical care, said Leighton Ku, a professor at George Washington University's Department of Health Policy and Management. "Because of that, you'll hold down 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 to pay out.
High deductible plans typically fully cover preventative care services, such as annual physicals, mammograms, colorectal screenings and immunizations. But all other medical costs are fronted by the policy holder until the deductible is reached. Then, the policy holder generally must pay copays or coinsurance for doctor's visits and other services, with the health insurance company paying the rest, until the plan's out-of-pocket maximum is hit.
"So the tradeoff is you have 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 typically has a lower monthly premium."
What are health savings accounts?
High deductible plans often come with the option to open a health savings account, or HSA. Money deposited into an HSA can be used to pay for qualified medical expenses like deductibles, copayments and coinsurance, but not premiums. The benefit is that this money is not subject to federal income tax, potentially allowing people to save money.
"If you are in a bracket where you're paying a decent amount of income tax, an HSA is an amazing tax-preferred savings vehicle that you can only get access to if you have the 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.
Whatever money in the HSA is unspent at the end of the year rolls over to the following year. HSAs sometimes offer interest, depending on the type offered by an employer or selected on the federal marketplace.
Who is best for a high deductible plan?
For people who do not anticipate needing significant medical care, a high deductible plan may be a wise option.
"The thing that makes this tough is you don't necessarily know in advance how much medical care you're going to need," Ku said.
Ku recalled once reading a guide about how to choose one of the many health plans offered by his employer, which at the time was the federal government. "One question was, 'Do you plan to get cancer in the coming year?'" Ku said. "I don't plan to get cancer in the coming year, but I don't know. You know, gee, 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 sick very much, in the coming year.' And if, in fact, you need to go to the doctor – worse yet, if you need to go to the emergency room or into the hospital – then you're going to have to pay the full … deductible."
Ku compared choosing a health plan to buying a car: "Should you buy a little car that maybe will not hold up to an auto accident, or a bigger, heavier car that's more expensive, that uses a lot more fuel, but is probably safer?"
If you need a lot of medical care, it makes more sense to get an HMO or PPO plan versus a high deductible plan, Ku said. An 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 in- and out-of-network doctors and don't require referrals for specialists, but they come with have higher premiums.
The bottom line is the "best situation for a high deductible health plan is a high deductible health plan, plus an HSA, for a wealthy, healthy young person," Ku said.
What risks come with choosing a high deductible plan?
With a high deductible plan, people who have unexpected health care costs like a catastrophic event or a cancer diagnosis must pay all of those costs until they've reached their deductibles.
"Your medical payments over the year are lumpier, and that doesn't work for everybody," Baker said. "There could be plenty of people where they might save some money with the high deductible plan, but it would mess up their household budgeting, because there's going to be a couple months after the plan year begins when you might have to come up with a few thousand dollars to pay for something. For most people, that's real money."
People who select high deductible plans need to consider how they will manage financially if they have to pay the deductible — and possibly all at once — in the case of a major medical event, Baker said.
"The money that you're saving on your premiums, you should put into a rainy day fund for when you're going to have to make a payment in the deductible," Baker said.
Confused about the various health plans? These people can help
"I'm a professor in this area, and I all the time find that I don't understand how my own health insurance works," Ku said.
People who get health insurance through their employers can talk to their employers' human resources or benefits departments.
The federal marketplace, healthcare.gov, directs people to three resources for help applying for insurance: assisters, agents and brokers.
Assisters are trained and certified by the marketplace to help people apply and enroll in a marketplace health plan or apply for free or low-cost coverage through Medicaid or the Children's Health Insurance Program. Assisters must be impartial.
Some agents and brokers are trained through 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 only can sell plans for the companies they work for. This means that they have a lot of expertise in the plans they sell but are motivated to sell plans from the insurers they represent.
Brokers are not bound to specific insurance companies. Brokers represent people buying insurance and generally have a wider scope of expertise on various insurance plans. When a broker sells a plan, the company pays the broker a commission.
Pennsylvania's health insurance marketplace, Pennie, helps people find certified assisters and brokers. Pennie also offers a "savings calculator" to help people select a plan. New Jersey's marketplace, GetCoveredNJ, has a customer service center that offers assistance and also connects people to brokers and certified assisters.
When is open enrollment in Pennsylvania and New Jersey?
Open in enrollment for plans purchased on government-run marketplaces in Pennsylvania and New Jersey begins Friday, Nov. 1. It closes in Pennsylvania on Jan. 15 and in New Jersey on Jan. 31.
