When it comes to choosing health insurance plans, one of the most important things to consider is the deductible. With any insurance policy, a deductible is the amount you must pay out of pocket before the insurance provider will pay for anything. While not every insurance plan includes deductibles, more than 80% of them do, so knowing which one is right for you is important. Many insurance plans are categorized by having a low deductible, meaning you only pay a little before the insurer begins to play, or a high deductible, which can be quite substantial. But because the premiums (costs) of high deductible insurance plans are lower, it can be a wise choice for some people.
The Benefits of a High Deductible Plan
Commonly called HDHPs (High Deductible Health Plans), insurance coverage featuring high deductibles (a maximum of $6,450 for an individual in 2015 with an Obamacare plan) are becoming increasingly popular with both individuals and employers alike. Some people like knowing that their monthly premiums will be lower, and employers generally see lower costs when providing HDHPs for their workers.
The main thing to understand when choosing a health plan is estimating just how much health coverage you think you’ll need in the immediate future. A high-deductible plan has far lower monthly premiums, so if you’re willing to gamble that you won’t need a lot of expensive medical treatment, these plans might be best for you.
For Americans covered by the Affordable Care Act (Obamacare), the most popular type of plan is the silver level, and the majority of silver plans are HDHPs.
An HDHP might be best for you if:
- You don’t expect to incur costly healthcare treatment in the near future
- You have the resources to pay for your deductible should anything happen
- You are generally healthy but on a restricted budget
- A substantial portion of your net assets are illiquid
- You do not suffer from a chronic illness
- You don’t have young children
- The most affordable insurance plan available to you is an HDHP offered by your employer
- You have enough funds in a health savings account to cover most or all of your deductible
Another factor to consider are co-pays, in which you’re required to pay some of the costs for certain treatment, as well as medications. Some insurance plans apply all care and medication costs towards the deductible, while other plans treat co-payments separately from the deductible.
The Downside of a High Deductible Plan
No matter how carefully described, a high-deductible plan is always going to be a calculated gamble. If an emergency arises, or you develop an illness that requires costly treatment, you could find yourself having to pay the full amount of a high deductible.
A plan with a lower deductible may be better for you if:
- You have young children, or are expecting children in the near future
- You have a chronic condition
- You saw your doctor four times or more in the past year
- You plan on undergoing an expensive medical procedure or receiving specialist medical care in the near future
- Your budget can accommodate the higher monthly premiums
As you can see, there are pros and cons of a high health insurance deductible plan and you have to carefully weigh the importance of each one to decide which plan is best for your and your family.