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Healthcare Plans
11 Jul 2018

The Lows and Highs of Healthcare Plans: Choosing the Right Deductible

The world of insurance is infinite, made up of a vast array of definitions that can easily create confusion when shopping for a plan. Deductibles only add to the mess, but as the policyholder, it will be up to you to decide if you want a high or low deductible for your health insurance. Much like finding the right bad credit loan, you want to do your research before making any decisions on what to do.

Don’t let the definitions weigh you down.

We’ll take you through the world of deductibles so that by the time you finish this article, you’ll know exactly what you need.

A high deductible health plan or a low deductible health plan? You’ll soon find out which is right for you.

What Are They?

deductible is the amount of money you will be required to put into your insurance plan before the company will pay for any expenses. Deductibles can range from a couple hundred dollars to thousands of dollars. Typically, a higher deductible means a lower monthly payment or premium.

If you have not met your deductible amount, it is up to you to pay for your entire medical bill.

How Do They Work?

Once your required payment threshold has been met for the year, the insurance company will begin helping you with healthcare costs. At this point, most insurance companies will require you to pay what is known as coinsurance.

When you pay coinsurance, it means you are paying for a percent of your health services. The insurance makes up the other percent.

If you continue to pay coinsurance until you meet your out-of-pocket maximum, the insurance company will pay 100% of your doctors’ bills.

There are numerous plans with different premiums, coinsurance rates, and out-of-pocket maximums. Plans with higher coinsurance have lower premiums; policies with lower coinsurance have higher premiums.

Average Prices

Unfortunately, the price of health insurance has been steadily rising. Costs now are nine times higher than they were in the 1960s. To give you an idea of the regular costs, the average deductible for individual plans in 2016 was $4,358.

The average deductible for family plans that same year was $7,983.

The result of these price hikes is that fewer people are seeking medical treatment when they need it. It also means more people are using emergency services improperly, placing stress on hospitals and staff.

What is a High Deductible Health Plan?

As you’ve probably gathered by now, a high deductible health plan is one where you have low monthly premiums, but high deductibles.

According to the IRS, to truly qualify as a high deductible plan, the deductible must exceed regular prices offered on the market. In 2017, the deductible had to be $1,300 or more per year for individuals and $2,600 for a family.

How does it work?

In the simplest terms, you get lower monthly payments but have to pay more out-of-pocket if you go to the doctor’s office. That means the insurance company saves money, as they won’t have to pay a large percentage of your bill.

Advantages

High deductible plans have several advantages, but their greatest benefit lies in the low monthly premiums. With healthcare currently mandatory until 2019 and a disproportionate amount of people living paycheck to paycheck, this is an affordable option.

For people who are healthy and whole, however, high deductibles are a great way to save money. If you don’t go to the doctor often, it means you won’t have to worry about out-of-pocket expenses. Additionally, you’re still covered if something does happen.

And you avoid that tax penalty at the end of the year.

Disadvantages

Of course, health mishaps and accidents happen. With a high deductible plan, the financial ramifications will fall almost entirely on you.

That means you’ll be more likely to push off going to the doctor’s if you are ill or something is wrong. In fact, a 2015 survey indicated more than 30% of individuals with deductibles of $1,500 or higher avoided medical care because they simply couldn’t afford it.

Ideal Candidates

Ideal candidates will have the following:

  • Good overall health
  • No children
  • No other dependents or elderly to care for
  • Enough money saved to pay out-of-pocket maximums

In addition, anyone burdened financially should consider a high deductible for the low monthly amounts it offers.

What Is a Low Deductible Health Plan?

A low deductible health plan offers low deductibles but high monthly premiums. Low deductible plans can cost at least twice as much as high ones in premiums. These are considered the “traditional” health care plans.

How Does It Work?

With a low deductible plan, you will have higher monthly payments. Much higher. However, those monthly payments mean the insurance company will pay more of your health bills.

Advantages

For anyone with children and for elderly individuals, a low deductible plan means they are covered if something drastic happens. Especially for senior citizens or those with chronic illnesses, this can be invaluable.

These plans make the cost of care much easier to predict and may be better choices in the long run. Of course, the lower deductibles also mean you’ll be able to access the policy’s benefits more quickly.

Disadvantages

The major disadvantage here is the cost. You’ll be paying a lot more each month for services that you may or may not use. If you’re a healthy individual, this may mean money lost for no real reason.

Ideal Candidates

Below is a list showing who should consider low deductible health insurance:

  • Individuals with children
  • Pregnant women
  • Senior citizens
  • Individuals suffering from chronic illnesses or anticipating frequent doctor visits in the future
  • Anyone with a history of frequent medical issues
  • Anyone considering surgery
  • Anyone who is involved in high-risk activities (or who has dependents or a spouse involved in high-risk activities)
  • Anyone who must take multiple (or expensive) prescription drugs

Individuals who can afford the monthly payments comfortably should consider a low deductible plan.

The Facets of Healthcare

Health care is a frustrating topic for many individuals, but understanding the basics of a high deductible health plan and a low one is the first step towards choosing the correct insurance.

We never expect to get sick or to need surgery. For those times, a healthcare plan may help. However, sometimes even this isn’t enough.

If you need a little financial help, read our article about instant loans. These no credit check loans can provide necessary funds in emergencies. And when you shop for healthcare, keep everything you learned today in mind. The knowledge may just provide you with a long, healthful life.