Health Insurance 101: Should I Get a Low-Deductible Plan?

When you get to choose a health insurance plan, you might have a few options to choose from. You may notice that the options have different deductibles. You might see an insurance plan with a high deductible, a plan with a low deductible, and perhaps one in the middle. What’s the difference, and how do you choose?

What is a deductible?

Your deductible is the amount you pay for medical expenses before your insurance benefits kick in. Let’s say your deductible is $500. First, you would need to pay $500 in out-of-pocket costs for medical expenses, such as a surgery, hospital stay, or x-ray.

Once you’ve reached $500 within a policy year, your benefits kick in (for the rest of the year). After that, you may only need to pay a small fee (copay) or percentage of the bill (coinsurance) for future services.

What's the difference between a low deductible and high deductible?

Deductibles can vary. Some may be around $500, while others could be several thousand dollars. A plan that has a deductible of at least $1,400 (for individuals) or $2,800 (for a family) is considered a high-deductible plan.

If your insurance plan has a low deductible, this means you may reach the threshold earlier and get cost-sharing benefits sooner. The drawback is that you’ll likely have higher premiums (unless you have an HMO plan, which tends to offer both low premiums and low deductibles). A premium is the monthly fee you pay for your health insurance.

That leads to the question: Are higher premiums worth it for a lower deductible?

Who benefits from a low-deductible plan?

Whether or not the higher premium is worth it depends on you and your needs. For some people, a low-deductible plan may help them save money in spite of the higher monthly fee. Those who benefit tend to be people who expect to use healthcare services frequently, such as:

• When you are pregnant and receiving maternity care (or expect to become pregnant)

• If you are managing a chronic illness that requires frequent doctor visits, treatments, or prescriptions

• When you have a larger family or many dependents, which may lead to more doctor visits

• If you are over 65, and thus more at risk for certain health conditions

• Or if you know you are receiving a surgery or procedure this year

Some people choose plans with low deductibles “just in case.” That way, they feel more protected in case something unexpected happens, like an unplanned pregnancy, an emergency surgery, or an unexpected diagnosis.

Again, the “right” health insurance plan depends on many factors. The plan that helps one family save money might not do the same for your family. Talk to an insurance representative for more help choosing your plan, and learn more here about how to save money on your health insurance.