Understanding Deductibles When Choosing Your Health Plan

We get it, deductibles can be confusing. But they are also so important when choosing your health insurance plan. Why? Because knowing how they work, and how much you can afford to pay, is crucial in making sure you select the right plan for you.

Lots of people are choosing the new high deductible plans now, because the monthly cost is often lower. So understanding how deductibles work is more important than ever.

Deductible Basics

A deductible is simply the total you'll pay out-of-pocket for health care services before a plan begins paying for those expenses.

When you sign up for a plan, you may be able to choose between a high or low deductible plan:

• A higher deductible plan means lower monthly payments.
• But, an injury or unexpected illness means you'll pay more out-of-pocket before your plan kicks in.
• If you're in good health and rarely use your plan, a higher deductible may be best for you and your budget.
• However, you might consider a low deductible plan if you or a family member has chronic health issues, or you have young children. You'll likely reach your deductible limit quickly, and your plan will help with health costs sooner.

Deductibles can range from a few hundred dollars to several thousand dollars each year, while some plans, like HMOs, have no deductibles at all.

If you rarely use your insurance other than for an annual wellness checkup, a higher deductible with a lower monthly payment may be best for you and your wallet.

However, if you or a family member has chronic health issues, or you have young children, you may want to consider a plan with a lower deductible since it’s likely that you’ll reach it quickly. Once your deductible is met, the insurance company will help with your healthcare bills. At the same time, you will pay a higher monthly premium.

To make a final decision, compare a low and high deductible plan side-by-side. Factor in your personal health and financial situation, and see which one best benefits both your budget and well-being. Many people are willing to assume the risk of a high-deductible plan. Also consider, if you choose a high-deductible plan, you’ll be eligible to take advantage of a health savings account, or HSA. This allows you to save pretax dollars for your health care costs.