One of the most significant factors to consider when signing up for health insurance is whether to go with a high deductible or low deductible health plan. There’s no one correct answer to this question. It truly depends on your circumstances and what’s going to be most beneficial for you. The key to making this decision lies in not undercutting your healthcare to save money. Keeping your health at the center of this decision can help you make a choice that’s right for you.
Low Deductible Health Plans
Those with frequent doctor visits or who know they may have some significant medical expenses on the horizon like knee surgery or having a baby are more likely to want a traditional health insurance plan. Traditional health insurance plans have lower deductibles. Having a low deductible insurance plan means that you pay less out-of-pocket when you require care before the insurance plan kicks in; however, there is a trade-off. Low deductible plans come with higher premiums. One additional benefit is that low deductible plans often include more generous coverage. Low deductible health plans offer more predictable healthcare expenses every month.
These types of plans work best for those who:
- Have small children, are pregnant, or plan to become pregnant
- Have a chronic condition which requires frequent doctor visits
- Are considering having reparative surgery (hip or knee replacement)
- Take several prescription medications (or one costly one)
- Have children who play sports with a high risk of injury
Two potential drawbacks to a low deductible plan are that you have to be sure to use in-network healthcare providers, and if you don’t require more extensive medical care, you’ll have paid out a higher monthly premium for nothing. Hence, it may not be the best choice for everyone.
High Deductible Health Plan (HDHP)
High deductible health plans can sometimes save you money in the long run because while they typically have higher out-of-pocket costs, once you reach your deductible for the year, the insurance pays 100% of the allowable amount throughout the remainder of the calendar year. For 2020, the deductible must be “at least $1,400 for an individual and $2,800 for a family” to qualify as a high deductible plan. To help offset the out-of-pocket costs, often HDHPs are combined with a Health Savings Account (HSA), but it’s important to note that not every HDHP is eligible for an HSA, so check with your insurance administrator.
HSAs are tax-advantaged accounts that allow users to save for qualified medical expenses, including eye exams and eyeglasses, dental treatments, hearing aids, weight-loss programs, nursing homes, and long-term care facilities.HSA contributions are tax-deductible, and they grow tax-free. Withdrawals used to cover eligible medical expenses are also tax-free. Money can be left in the HSA account until you need it for qualified medical expenses, so unlike a flexible spending account, it isn’t a “use it or lose it” situation.
While you’ll pay more for your deductible with a high deductible health plan, you do get the benefit of a lower premium. That’s a plus if you stay healthy and never need to meet your deductible or the maximum out-of-pocket limit.
Both low deductible and high deductible health plans have pros and cons. You’ll need to assess your current individual healthcare needs and make a price comparison to determine what will work best for you.