Managing Wellness

High-Deductible vs. Low-Deductible: Which Is Right for Your Business?

  • Look at your budget; high-deductible plans cost less, but low-deductibles have fewer out-of-pocket costs
  • Young staff may prefer high deductibles, but those with chronic conditions may require low deductibles
  • CDHPs combined with HSAs can help ease the burden of high deductibles for many employees
Posted by February 7, 2019

Year after year—especially during open enrollment season—HR leaders and employees alike tend to compare high-deductible vs. low-deductible plans. When deciding which plan is better for the workforce and bottom line, it’s important that organizations thoroughly consider the merits of both options.

If you’re evaluating the two plan types on behalf of your colleagues, there are a number of factors that can help you identify the best fit for your company. Here are a few strategies that can help you arrive at a decision.

Set a Budget to Narrow Your Options

If your company’s budget is modest, your coworkers will generally prefer a high-deductible plan with lower premiums, as this allows them to spend less of their own money each month. However, if the organization’s health budget is robust, then staff may wish for a low-deductible plan. In some cases, you might be able to offer both and leave the choice up to individual employees.

If your organization allows staff to choose, take time to educate your fellow employees about the differences between each plan. Encourage them to look at their personal budget and determine if they can afford higher monthly premiums, or if they have enough savings to cover unexpected accidents or illnesses (which could cost a lot with a high-deductible plan).

Helping coworkers estimate their yearly total cost of care can make their decision easier. HealthCare.gov recommends considering factors such as prescription costs, doctor visits and riskier activities like contact sports.

Consider Discounts and Tax Credits

When you and your colleagues are looking at high-deductible vs. low-deductible plans, you’ll also want to consider tax credits. If your fellow employees purchase their plans through the Health Insurance Marketplace, they may qualify for a premium tax credit, depending on their income. But if they use company plans that come from outside the marketplace, then this tax credit isn’t an option.

On the other hand, your small business might qualify for a tax credit if it offers SHOP coverage, has fewer than 25 full-time employees (with an average salary of $50,000 a year or less) and pays at least 50 percent of insurance premiums. The smaller the business, the higher the credit typically is. Credits can help your organization offer better plans. You can estimate the size of your allowance with this tool.

Look at the Health of Employees

Remember, it’s not about how much the plan costs the organization. You’ll gain more employee loyalty if you offer health care plans that workers appreciate, and your company could be able to attract top talent in the future.

If your fellow employees are generally young and healthy, then it’d likely be a safe bet to offer a high-deductible plan. These can have unexpected out-of-pocket expenses from accidents or illnesses, but this is typically less of a concern for younger staff.

On the other hand, if you have older staff, pregnant employees or team members with chronic conditions, then a low-deductible plan may be better choice. This is because the cost of seeing specialists can really add up over time.

CDHPs Might Help You Bridge Both Worlds

If you want to offer lower-deductible plans but just can’t seem to make it work, consider providing a Consumer-Directed Health Plan (CDHP). These can combine high-deductible plans with Health Savings Accounts (HSAs) that employees can use to help pay for unexpected medical expenses. Bonus: your organization can contribute to employees’ HSAs.

Consider the Network Size

Network size can make a big difference when choosing between high- and low-deductible plans. Low-deductible plans with higher premiums often fall under the category of PPO, which boasts large networks. In contrast, some HMOs offer lower deductibles and lower premiums, but they have a very limited network. A high-deductible plan may have a fairly large network, depending on how it’s set up; large networks help ensure that staff members get the best care available close to their home.

Today, many employers offer both high- and low-deductible plans so employees have a choice. Talk to your organization’s health broker about workforce demographics and what types of plans the budget can accommodate. You might also consider distributing an anonymous survey to get a better idea of staff member’s health needs and their satisfaction with the company’s current plans.

Looking to find the best dental insurance plans your company can offer employees? Discover available options with the Dental Plan Navigator on United Concordia Dental’s website.

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