By Kerry Dooley Young
Special to The Washington Post

For millions of Americans, the end of the year means it’s time to review health insurance coverage as open enrollment for 2025 begins. This usually happens in October and November for the 154 million who get their plan through work; for the additional 21 million who have access to insurance through the government-run marketplaces created under the Affordable Care Act (ACA), it began Nov. 1 and runs through Dec. 15.

One of the biggest changes in recent years is the rise of high-deductible plans, which offer lower monthly premiums but require consumers to pay most of the upfront medical costs out of pocket before the plan’s coverage begins. While their cheaper premiums may seem like a bargain, consumers risk paying much more if they have unexpected illnesses or fail to budget well for routine care.

Here’s what you need to know when it’s time to choose a health insurance plan:

How are high-deductible plans different from other options?

Most Americans are familiar with the more traditional “preferred provider organization” (PPO), which offers a wider network of participating health professionals and a lower deductible in exchange for a higher monthly premium. They can be a good choice for people who will need more than routine medical care. They also tend to have lower co-pays and don’t always require patients to get their primary care physician’s approval to see specialists.

Some employers also offer the option of a health maintenance organization (HMO), which typically charges lower premiums but imposes more restrictions on access to specialists, with primary care physicians sometimes acting as “gatekeepers.”

Both types of plans have lost ground to high-deductible plans. In 2006, only 4% of workers were covered by them; by 2024, the share was 27 percent, according to the nonprofit health policy research organization KFF. At the same time, the share of people in PPOs fell from 60% to 48%, while those in HMOs fell from 20% to 13%.

Why can high deductible plans be risky?

Many Americans have experienced sticker shock in recent years as deductibles have increased in most types of plans. HMO or PPO plans average about $3,000 a year for family coverage (when all members’ out-of-pocket expenses are factored into a deductible), compared to nearly $5,000 for high-deductible plans.

The ACA established federal requirements for most health plans, including those with high deductibles, to ensure that the most basic routine preventive services (such as mammograms and colorectal cancer screening) do not require copayments. But given the threshold for coverage in high-deductible plans, subscribers are more tempted to curtail or delay other types of preventive care and elective treatments to save money, research has shown.

In other cases, consumers might put off elective treatments and exams until the end of the year after they rack up other health expenses to meet their deductible. This can be particularly risky for those who have chronic conditions such as heart disease and diabetes, which can lead to missed opportunities for earlier intervention.

Because these plans can result in huge out-of-pocket bills, those with higher incomes are in a better position to finance their health care, while those with lower incomes are more at risk, said Sabrina Corlette , co-director of the Georgetown University Research Center. Health insurance reforms. She urges “caution” before signing up – despite the appeal of lower premiums.

This is especially the case for the millions of Americans who are strapped for cash even for basic needs. A 2022 Federal Reserve survey suggested that about 37 percent of adults in the United States would not be able to fully cover a $400 unexpected expense with either cash or its equivalent, such as a credit card.

Why have health insurance deductibles become so expensive?

Deductibles were pushed up in part by broader increases in drug prices. Another driver is strengthening the health system. Larger systems can command higher prices, and because employers want to offer plans that include major hospitals in their region, hospitals have more leverage in those price negotiations, Corlette said.

“Employers and insurance companies come back and pass those costs on to consumers,” she said. “This is done both in the form of higher premiums, but also through higher deductibles and other forms of cost sharing.”

The consolidation trend has caught the attention of the Justice Department’s antitrust division, the Federal Trade Commission and the Department of Health and Human Services, which have launched a joint investigation into how mergers and acquisitions, particularly through private equity, are driving up health care costs .

Can health savings accounts help consumers cover some of these costs?

Created in 2003, HSAs allow people to set aside a portion of their paycheck tax-free for health care costs. These accounts have become increasingly popular for those with high-deductible plans because they can be used to cover bills before the deductible begins. HSAs are also appealing because they are portable and investable, so employees can take them to a new job or switch.

However, this very feature has opened up HSAs to criticism as tax shelters for the wealthy, who have more money to funnel into these accounts. A Congressional Research Service report based on 2017 IRS data indicated such a split in income: As many as 17 percent of returns reporting an adjusted gross income between $200,000 and $499,999 indicated the use of an HSA, in while less than 4% of those between $10,000 and $24,999 did so.

If I have a choice of health insurance plans, which is the best option for me?

The answer depends on your personal and financial circumstances. But experts agree that there’s more to consider than just the monthly premium. If you only need routine preventive care, the high-deductible option may be attractive if you accept its coverage limits as a trade-off.

But people need to be realistic about their potential financial liabilities and consider what will happen if they have an unforeseen illness or accident, said A. Mark Fendrick, director of the University’s Center for Value-Based Insurance Design from Michigan.

“Even if you think you’re a superhero, you have to make sure you can cover the deductible in your plan,” he said.

Experts also recommend looking closely at what services are covered in different plans.

Deniece Maston, an HR knowledge advisor for SHRM who worked for government contractors, recalled talking to employees who were initially attracted to the plans’ low premiums. After encouraging them to consider their families’ likely medical needs, they often made different choices, she said: “When they did the math, they found out that the cheaper plan was actually paying more.”

Whatever you choose, you should also make sure that your plan information about network medical professionals are up-to-date by checking with the doctor’s office. Sometimes insurer directories are inaccurate, leaving people searching for new doctors and hospitals or risking higher costs for out-of-network care.