High or Low Deductibles: What You Need to Know

What is the difference between a low and high deductible health plan? Which one is right for you? Chances are if you have health insurance, you’ve had these questions. There are a lot of factors to take into consideration other than just monthly premium costs.

What is a deductible?

First, it is important to know exactly what a deductible is. A deductible refers to the amount of money you will have to pay upfront before your insurance kicks in. Once you pay up to your deductible, your insurance will start paying larger portions of the charges. This is different from a premium, which is the price you pay monthly to have insurance, regardless if you use it or not. Some preventative services do not have a deductible, meaning you simply have a copay.

High deductible

A high deductible plan typically comes with lower monthly premiums, but will leave you paying more for care before your insurance kicks in. High-deductible plans make more sense for young people who are generally healthy, because preventive care is free under the Affordable Care Act, and most policies will typically allow you to see your primary care doctor with a copay rather than paying toward the deductible. A few doctors’ visits a year won’t be much of a financial setback for a generally healthy person.

Low deductible

Plans with lower deductibles tend to offer patients a more predictable cost and more generous coverage, but come with a much higher monthly premium that can be hard to fit into a budget for some. While you will pay considerably less before your insurance company comes in, your monthly expenses will be greater. This type of plan is recommended for people who expect needing considerable amounts medical care, those with chronic illness or who require seeing specialists often for example.

Out of pocket limit

Regardless of which plan type you choose, there will likely be an out of pocket limit for your coverage. This means there is a cap on the amount you will have to pay for medical care in a year. Once you pay this limit, your insurance pays 100% of any further covered services for the plan year. For example, if you require a covered service of $20,000, your deductible is $2,000, you first pay the deductible, then any coinsurance on the remaining amount, for this example we’ll use 20%, so that is 20% of $18,000. Your out of pocket maximum is $5,000. So although your total would be $2,000 deductible + $3,600 coinsurance = $5,600 your insurance would pay for anything beyond your out of pocket limit. Usually, plans with higher premiums have lower out of pocket maximums.

Now that you know more about the different types of plans, it is best to review your specific situation with a health insurance professional. Feel free to call us at 724-929-2300 to discuss your health insurance needs and any concerns you may have. Our insurance experts will be happy to help answer any questions you may have.

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