What’s the Difference Between High Deductible and Low Deductible Plans?
When you sign up for a health insurance plan, you need to consider various out-of-pocket costs. Your deductible will typically be the most expensive cost to consider, so it’s important to understand the difference between low deductible health plans and high deductible health plans. The deductible that’s right for you will primarily depend on your health and financial situation.
What Is the Difference Between a High and Low Deductible?
Before choosing a health insurance plan, it’s important to consider all of the potential costs you need to cover. Before signing up for an insurance plan, consider the following factors:
- Deductible: Your deductible is the out-of-pocket amount you pay upfront for services before your insurance pays.
- Coinsurance: After you pay your deductible, your insurance will start paying a greater amount toward your needed services. This is known as coinsurance.
- Copay: Your policy terms will list a copay, which is a fixed cost you must pay on your medical expenses.
- Premium: Your premium is the monthly amount you must pay on your insurance policy even when you don’t need or use it.
- Out-of-pocket maximum: The out-of-pocket maximum is the highest amount you must spend on your medical care per year. If you remain in-network, this amount doesn’t include your premium. Once you reach your out-of-pocket maximum limit, your insurance company will pay 100% of your in-network services.
Your health insurance deductible is the money you pay for eligible medical services before your insurance plan kicks in and starts to pay. For example, if you have a $1,000 deductible, you will pay the first $1,000 of your medical bills out of pocket. After you pay the deductible, you will typically only have to pay a copayment fee on covered services while the insurance company covers the remaining amount.
High deductible plans require policyholders to pay higher upfront costs, but their monthly premiums are lower. Low deductible plans require policyholders to pay less money upfront before their insurance starts to cover services, but they typically pay higher monthly premiums.
Pros and Cons of High vs. Low Deductibles
Individuals with high deductibles have to pay more of their own money for health services upfront until they reach their deductible. However, insurance companies will cover 100% of costs up to an allowable amount after policyholders reach their deductible. Individual and family plan deductibles cannot exceed a set amount, typically unless policyholders need out-of-network services.
High deductible policyholders pay higher upfront costs for services, but they pay lower monthly bills for their insurance plans. Some qualified high deductible plans offer a health savings account (HSA) to help policyholders cover out-of-pocket costs. High deductible insurance plans will sometimes cover preventive health services at little to no cost. These services can include the following:
- Annual physicals
- Well-child visits
- Routine prenatal care
- Vision and hearing screenings
- Cancer screenings
- Screenings for heart conditions
- Screenings for pediatric conditions
- Weight loss programs
- Tobacco cessation programs
Individuals with high deductibles can also benefit from employer contributions. Many employers who offer high deductible health plans contribute to their employees’ HSAs, which provides employees with free money toward their health care costs.
The downside to a high deductible plan is that it could cause you to pay high costs for care. Whether you manage a chronic illness or get an unexpected injury, you will have to pay significantly if you frequently visit the doctor or hospital or require serious procedures.
Low deductible insurance plans require you to pay less money upfront if you need medical care. However, you will have to pay a higher monthly bill for your health insurance plan. The benefit of low deductible plans is that policyholders can receive extensive care and medical services with low upfront costs. If you become injured, require surgery or develop a serious illness, a low deductible plan can help you predict and manage health care plans easily without paying high out-of-pocket costs.
The downside of low deductible plans is that you can risk paying high monthly premiums for nothing if you don’t need extensive care. Additionally, you risk losing your insurance plan if you are unable to pay your monthly premium. You may find it safer to choose a low-premium, high deductible plan if you’re not sure you’ll be able to afford a high monthly premium.
How to Choose a Deductible
Your health situation will ultimately determine which deductible is best for you. If you are healthy and young, a high-deductible plan may be best because you will most likely only require preventive care and little to no medical services per year. However, you may benefit more and save more money with a low deductible plan if you fall into any of the following categories:
- Pregnant individuals or people planning to have a baby in the near future
- Older adults
- Athletes who play high-risk sports
- Individuals with serious illnesses or conditions requiring expensive prescriptions or procedures
When choosing a deductible, you should also consider your financial situation. Consider your budget, savings and how easily you could meet a high deductible if you needed to. Consider how much money you could contribute to an HSA each year if you had a high deductible plan with this added benefit. If you are looking at a low deductible plan, consider how much money you can afford to pay on a monthly premium.
Plans That Fall Into High and Low Deductible Categories
Whether you are looking for a high or low deductible, California has health plans to meet your needs. A traditional health insurance plan has higher premiums and lower deductibles, while a high deductible health plan has lower premiums and higher deductibles. You can access health insurance through your employer, private health insurance companies or government health care. Before signing up for health insurance, consider the following plans and features:
- Platinum: The platinum plan has the lowest deductible and the highest monthly premium. It pays 90% of your medical costs.
- Gold: The gold plan has a low deductible and high monthly premium. It pays 80% of your medical costs.
- Silver: The silver plan has a moderate deductible and a moderate premium. It pays 70% of your medical costs.
- Bronze: The bronze plan has the highest deductible and the lowest monthly premium. It pays 60% of your medical costs.
- Catastrophic: The catastrophic plan is only available for individuals experiencing financial hardship or under 30 years old. It pays less than 60% of your medical costs.
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