Choosing the Right Deductible for Your Insurance
Although choosing a health insurance plan requires carefully balancing co-pays and coinsurance amounts, it is the monthly premiums and deductibles that represent the greatest out-of-pocket costs for policy-holders. When shopping for new health insurance, many money-conscious consumers are torn between purchasing an affordable policy with high deductibles or a more expensive plan with lower deductibles.
What is a Deductible?
In order to make an informed decision about what type of health insurance plan to purchase, one must first understand what a deductible is. In short, the deductible is the amount of money you must pay out of pocket for covered treatments and medical services before your insurer will begin paying benefits. In other words, if you have a $1,000 deductible and need a $10,000 operation, you will pay $1,000 toward the cost of the surgery, and your medical provider will bill the remaining $9,000 to your insurer, who will then pay the covered amount toward the balance.
How Does a Deductible Affect Your Insurance Premiums?
Deductibles can be as low or as high as you choose. Naturally, the less you want to pay out of your own pocket toward a covered service, the more your insurer will charge you in monthly premiums. On the other hand, choosing a high deductible can reduce your monthly premiums significantly.
Traditional health insurance plans implement both an individual deductible and a family deductible. However, certain high-deductible health plans may forgo the individual deductible in favor of a high family deductible that is usually several thousand dollars. High deductible plans have lower monthly premiums, and insurers encourage policy-holders to take advantage of tax-free health savings accounts which allow individuals and families insured by high deductible health plans to pay for out-of-pocket medical expenses with untaxed income.
How to Know Which Deductible is Right for You
Furthermore, with the passage of The Affordable Care Act, all health insurance plans – including those that subject all covered services to the deductible – must provide 100 percent benefit coverage for preventive care and wellness visits with no out-of-pocket cost to the policy-holder. That means you can take your healthy family to the doctor for check-ups free of charge, pay approximately $150 or less for sick visits, and stash the rest of the savings away to help pay for deductible costs should they arise.