Compound It! Does an HDHP make sense if you're single?
Among my self-employed pals who bought their own health insurance, many chose policies with the highest deductible, and in, turn the lowest monthly premiums.
Their reasoning? "Oh, I'm young and healthy," they shrug. "I don't need to go to the doctor."
Heard this one before, right? That might be the case, but what if you're single? If you're unpartnered and opt for a high-deductible health plan (HDHP) just to save on premiums, you might want to think twice.
Can you cover the deductible?
This might seem obvious, but are you able to cover out-of-pocket expenses, including the deductible? For the unacquainted, in 2019 a qualified HDHP has a minimum of $1,350 deductible per year if you're flying solo, and $2,700 for families. The maximum you'll pay out-of-pocket annually is $7,900 for individuals, and $15,800 for family coverage.
Ideally you should have enough to cover at least your deductible. If you have some cash set aside, ideally in your healthcare budget, an HDHP could be a good fit for you. And besides deductibles, you'll want to look at the other costs, such as co-pays, cost of lab work, X-rays, and prescription medication. You'll also want to know what's free of charge in your plan, so you can budget accordingly.
In the four years I've been a freelancer, I've been on both a high-deductible health plan and one with a standard deductible. The irony? The years I was healthy, I had a standard deductible plan. And the years when I needed more medical attention were the ones I was on an HDHP. There's no telling what the future warrants. Regardless, you'll want to set aside some funds to use exclusively for medical costs.
Are you putting your health on the line?
If you have higher out-of-pocket costs, chances are you might postpone going to the doctor. In fact, according the Kaiser Family Foundation (KFF), in 2017 13.5 percent of American adults didn't see a physician because of the cost. Given the fact that many health plans offer free preventative car (i.e., an annual checkup and shots), if you need to see a specialist, you'll need to pay out of pocket before the insurance kicks in.
Are you protecting your greatest asset?
Your greatest asset isn't necessarily tied to your home, or are investments sitting in a brokerage account. It's you, and your ability to work. If you're not tending to your health, and investing in good food, exercise, rest, and what have you, you're jeopardizing your capacity to earn more. Being sick means more time taken off work, and spending more on medication and doctor bills.
What's more, the healthier you are, the more you have to look forward to once you're of retirement age. While preventative care might not save you money, it could improve your quality of life.
And when you're single, you don't have your spouse's income and benefits to rely on should you fall ill and aren't able to work for an extended period of time. Plus, the less you earn, the less you'll receive in Social Security benefits. That's even greater reason why you should stay healthy when you're single.
Will it cost more?
Within three months of being self-employed, I suffered an eye injury. Although it was a minor incident, I was out of work for about three weeks. Plus, I had to pay for two trips to the ER, plus a handful of specialists visits and eye medication. It probably cost me about $10,000 total, including the time I couldn't work. If I had a standard deductible plan, I would've easily saved a few grand. However, because I had some savings, I was able to seek treatment without hesitation.
Looking back, if I had opted for a standard deductible health plan, I would've probably end up saving more on the deductible and copayments. If you don't have any savings for your medical expenses, then you might want to consider hopping on a plan with a lower deductible and higher monthly premiums.
If you don't anticipate paying doctor visits, then a HDHP when you're single could make sense. But of course, you just never know. While I traditionally don't get medical treatment very often, a one-off incident created a deep dent in my wallet. Know the pros and cons of an HDHP can help you gauge whether it's the smart choice for you.
Compound It! is your weekly update of achievable, effective, no-nonsense HSA saving and investment advice, delivered by people who make it work in their own lives. For the latest info about your health and financial wellness, be sure to check out the HSA Learning Center, and follow us on Facebook and Twitter.