Should I Go With a High or Low Deductible?
As I help clients customize a healthcare insurance plan, I remind them that there are more costs to consider when deciding between a high or low deductible. It’s important to understand what the terms premium, deductible, out-of-pocket limit, co-insurance, and co-payment mean and how they all work together. Understanding these basic healthcare insurance vocabulary insurance terms is important in order to customize a plan that works best for you.
Basic Terms to Understand
Before we discuss if a high or low deductible plan is right for you, let’s review some basic health insurance terms.
- Premium: an amount to be paid per month, whether or not you use it.
- Deductible: a specified amount of money that the insured must pay before an insurance company will pay a claim, with the exception of free preventive care.
- Out-of-pocket limit: A cap is the most you’ll have to pay during a policy period (usually a year), not including premiums, for health care services. After you’ve reached your out-of-pocket maximum, your plan begins to pay for 100% of in-network services that are covered by your policy.
- Co-insurance: a larger portion of money your insurer starts paying after you meet your deductible.
- Co-payment: a fixed amount of money that is required to pay at the time of each visit to a doctor.
How does a Deductible Work?
Insurance deductibles are the amount of money you have to pay toward your healthcare before your health insurance carrier starts covering costs. Deductibles can range from a couple hundred to thousands of dollars. Monthly premiums vary, but lower deductibles tend to have higher premiums and higher deductibles have lower premiums.
Who should go with a high deductible?
A higher deductible typically has a lower monthly premium. A high deductible plan might be right for you if:
- You’re healthy and hardly get sick or injured.
- If an unexpected medical expense comes up, you can afford to pay your deductible within 30 days of being billed.
- You are under 65 years of age.
Who should go with a low deductible?
A low deductible typically has a higher monthly premium. A low deductible plan might be right for you if:
- You have a chronic condition.
- You need to visit the doctor on a frequent basis.
- You are 65 or older.
- You’re eventually going to need surgery like hip or knee replacement.
- Your medication bills are expensive.
- You or your child plays a high risk sport.
Your decision will be based on your individual, family, and financial needs. If money is a concern, it’s always best to go with a high deductible plan. It’s better to have coverage than no coverage. Having no medical coverage puts you at risk of having to pay full priced medical bills.