Should you choose a Low- or High-Deductible Health Plan?

Consider deductibles options when choosing a health plan. The premiums are not the only thing which to consider.

High-deductible plans were designed to do a couple of things. First, share expenses to a certain degree in order to reduce the probability the insurance company would end up paying. This in turn reduces risk. The overall benefit is to reduce the premium. If you have limited exposure to medical events, you save money, obviously. Also, to encourage people to compare high cost medical expense items in order to lower the overall cost of their part of the shared expense. This also helps to reduce risk for the insurance company.

Most health care expenses are not planned, they cannot be foreseen. As a result, people choose not to get care even if they need it because of the cost and/or hardship. This causes even higher costs if something serious goes unattended. Conditions get worse, not better.

If you choose to go with a higher deductible plan you should have the money saved, or available to pay your agreed part of the risk shared by the insurance company. However, you must also consider when the calendar deductible will be invoked. You may have paid out your deductible and another event in the near future falls after the deductible reset. Now you are faced with coming up with your share again, before you can save to provide your part.

Key terms to understand.

Premium: The monthly cost of your insurance plan.
Deductible: The cost you pay before any of the insurance benefits start to cover your expenses.
Out of Pocket Limit: a limit of the part you pay per year. This does not include premiums. Typically, after you meet this cost, the insurance company must pay 100% of the remaining costs for your in-network expenses.

Eligibility for HSA (Health Savings Account) according to the ACA for 2016.
1. Minimum deductible = $1300 for individual, $2600 for family.
2. Minimum deductible = $2600 per person with family plans with deductibles per member.
3. Out of Pocket limit of $6550 for individual and $13100 for a family. This is also the maximum deductible for families and individuals for 2016.

Things to consider for HSA plans with a High Deductible Health Plan:
1. You are healthy and rarely get sick or go to the doctor.
2. You have the available money to pay your deductible.
3. You can make a significant contribution to your HSA account.
4. You can also use the money in your HSA to save and invest.
5. You want to take advantage of your medical expense to reduce your taxable income. Contributions are not taxed.

Things to consider for a Low deductible or No deductible plan:
1. You are pregnant, planning pregnancy, or have small children.
2. You need to see a doctor frequently or have chronic conditions
3. You are near age 65 or older.
4. You require reparative surgery like knee, rotator cuff or elbow replacement.
5. Children in your care play sports and have a higher risk of injury.

You need to look closely at your physical and financial conditions. Risk assessment is important to do to minimize your overall burden. We can help you weigh these considerations in order to make a decision.


By Lacie Glover March 24, 2016 Finding Health Insurance, Health

Lacie Glover is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @LacieWrites.

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