Should You Opt For A High or Low Deductible Healthcare Plan?

Choosing a healthcare plan can be an overwhelming experience. It’s hard to know what your needs will be throughout an entire year. If you’re unhappy with your current plan or struggling to decide which one will be best for you, here are a few points to consider before making your choice.

What Is a Deductible?

First things first, you must know how an insurance policy works. What exactly is a deductible? This is an amount of money you’ll have to pay before your insurance will start paying. For example, if your insurance plan has a $1000 deductible, you will have to pay the entire $1000 yourself before your insurance will start paying anything towards your bills. It’s possible to meet it after paying several smaller medical bills or you could meet your entire deductible from one large bill. It’s important to note that this amount is separate from your monthly premium costs.

Once you’ve met your deductible, most insurance plans have what is called co-insurance. This is the percentage they will pay after you’ve met your deductible. For example, if your co-insurance is 80/20, your insurance company will pay 80% of your medical bills and you will still be responsible for the other 20% until you meet your out-of-pocket maximum amount which varies depending on your plan. This is the absolute most you’ll be required to pay in a year. If you meet this larger amount, most insurance plans will cover 100% of your bills after that.

Assess Your Healthcare Needs

Before you decide on a healthcare plan, it’s important to take a look at the upcoming year. While it’s impossible to know exactly what your healthcare needs will be, it’s important to estimate as thoroughly as possible. An article written by Rebecca Lake for prudential.com states, “If you’re young and healthy, you may be less likely to need anything more than preventive care, in which case a high-deductible plan could be the better fit. On the other hand, a lower deductible may be more appealing if you’re older, have a chronic health condition, participate in high-risk sports or activities, are pregnant or plan to have a child at some point, or you require pricey prescriptions for a health issue.”

Assessing your healthcare needs to the best of your abilities makes it easier to decide whether a high or low deductible plan is right for you.

Take Note Of Your Finances

Another important thing you should do before you choose a healthcare plan is consider your financial situation. In fact, this might be the ultimate deciding factor in determining which health plan you choose. You need to determine how much you can afford to pay monthly. Do you have enough money coming in to afford the higher monthly premiums of a low deductible plan? Do you have enough in your savings to cover the larger upfront expense of a high deductible plan? Determine what makes sense for you financially. This will help you narrow down your choices.

Additional Factors

In addition to deductibles, you’ll want to take some other factors into consideration as well. Look into which plans have a large network size (access to providers near you), which plans have the coverage you need (i.e. dental and vision), out-of-pocket maximums, plan structure and covered expenses also are important to think about as well.

Look Into An HSA

Lastly, if you receive private insurance through your employer, check to see if they have an option to sign up for an HSA (Health Savings Account). This is one additional benefit to selecting a high deductible healthcare plan. It’s a way to allocate money to a savings account you can use specifically for healthcare. It’s taken out of your paycheck before taxes and can be used for nearly all of your medical expenses (like doctor visits) as well as medical related expenses (like cough syrup or other medicine/medications).

Check with your employer to find out what their policies include. For example, some companies are willing to match your HSA contributions. It’s certainly worth looking into when trying to decide which health plan to opt into.

Selecting a healthcare plan can feel like a high stakes operation. There are a lot of options and you must balance cost and coverage. Before you let the process overwhelm you, put the appropriate thought into the selection. Once you’ve narrowed down your options to a few plans, it’ll be much easier to make a decision.