Health Insurance 101: Should You Get a High-Deductible Plan?

One benefit of a high-deductible plan is a lower premium.

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When signing up for a health insurance plan, many people may initially gravitate toward a plan with a low premium. That’s the monthly fee you pay for your health coverage, so a low premium may seem like a less expensive option. However, plans with low premiums tend to come with high deductibles. What’s a high-deductible plan, and what are the pros and cons?

What is a deductible?

Remember, your deductible is the amount of money you spend on medical expenses before your insurance benefits kick in. Before you reach your deductible, you may have to pay full price for certain services, such as an x-ray or surgery. After you reach your deductible, you may only have to pay a small fee (copay) or a percentage of the bill (coinsurance) for those same services.

Deductibles for different health insurance plans can fall along a pretty wide spectrum. Your deductible could be anywhere from a couple hundred dollars to several thousand dollars. To put it simply, here’s the difference between a low-deductible and high-deductible plan:

  • A low-deductible plan means you’ll pay less of your own money before your insurance benefits kick in. Learn more here about the pros and cons of a low-deductible plan.
  • A high-deductible plan means you will need to spend at least $1,400 (for an individual plan) or $2,800 (for a family plan) before your insurance benefits kick in.

Who benefits from a high-deductible plan?

Since high-deductible plans usually have low premiums, does this mean you’ll save money on your insurance with these plans? That depends on a few different factors.

The people who benefit from a high-deductible health insurance plan are typically people who:

  • Are young and generally healthy
  • Are not managing a chronic illness that requires regular doctor visits and treatments
  • Do not have multiple dependents on their plan
  • Are not expecting to need any major surgeries in the upcoming year
  • Are not pregnant or trying to become pregnant
  • Feel confident that they can afford the out-of-pocket expenses if a medical emergency occurs

People in these groups tend to use healthcare services less often. They may only need preventative services, such as annual checkups and vaccinations. These services are often free or low-cost under most insurance plans anyway. As a result, they may save money on a high-deductible plan because they can enjoy the lower premiums.

What are the possible drawbacks of high deductibles?

Even if you are someone who would generally save money on a high-deductible plan, you should know that these plans are considered riskier than low-deductible plans. That’s because if a medical emergency happens, you may end up having to pay a lot of your own money out of pocket.

Because of this, some people believe it’s worth it to pay a higher premium for a lower deductible, even if they are young and healthy. This is basically an investment in the event of a medical emergency or unexpected health problem. After all, you can’t always predict when you’ll be pregnant, need a major surgery, get a serious diagnosis, or need care after a big accident.

Here’s the deal: The “right” health insurance plan depends on many factors. Talk to an insurance representative if you need more help weighing your options and choosing your plan.