Deductibles, premiums, copays; if these terms make your head spin, you’re not alone. A 2017 survey from Policygenius shows that 96% of Americans overestimate their understanding of health insurance terms and concepts.
Unfortunately, not being familiar with deductible health insurance can have an enormous financial and legal impact on our lives. If you’re interested in understanding health coverage and need help finding the best plan for your needs, read on. Here we’ve broken down the basics of healthcare insurance and how to choose the best one for your needs and your wallet.
What Is a Deductible Plan?
A deductible is how much you have to pay in health care services before your insurance plan starts to take over on costs. Let’s start with an example. If you have a health plan with a $2,000 deductible, you’ll have to pay for the first $2,000 of the covered services yourself.
You pay a set amount out-of-pocket, all at once or throughout the year. Then, the remainder of the covered services is paid for by the insurance. Afterward, you’ll only need to pay for a copay or coinsurance rate (which is usually a percentage or rate from covered insurance).
With certain services, such as checkups or preventative care, your insurance may cover it regardless of whether your deductible is paid in full or not. Plans may also have separate deductibles for different services, such as prescription medicine.
Types of Health Insurance Deductibles
High-Deductible Health Plan (HDHP)
The HDHP plan requires policyholders to pay for a higher deductible, which must be met before your plan benefits kick in. Until that’s paid in full, you can only receive in-network preventive care. In 2019, the HDHP was stated to be any plan that has a deductible of at least $1,350 for an individual or $2,700 for a family.
There’s a reason why an HDHP has more expensive out-of-pocket maximum limits. Once it’s paid off, the insurance plan pays 100% up to a certain amount for the remainder of the year. Other benefits include having lower monthly premiums, as well as being eligible for a Health Savings Account (HSA).
Low Deductible Health Plan
For those that want to pay less to receive services, they can set a low deductible — but it comes at a cost. Instead of paying a high deductible, the policyholder will have to pay for a larger premium every month to make up for it. This plan is beneficial if you or your loved ones will require ongoing care. Also, unlike the HDHP, it’s not eligible for an HSA.
While it doesn’t specify how much you’ll pay as an individual, it focuses on paying a deductible (and receiving coverage) as a family. In these plans, paying the initial deductible can apply to each individual or to the total cost of everyone included.
For instance, if your family deductible is $1000, you’ll have to pay $1000 out-of-pocket before the policy begins covering services for you all. The difference is that family deductibles act as a bundle to eliminate the need to pay for each individual. If your deductible is already paid in full, you don’t have to wait to pay for an individual to receive coverage.
How to Save on Health Insurance Deductibles
Before you can decide how much you want to save on health insurance plans, you need to determine how much coverage you need. Age, medical history, and family planning are some factors to consider to help you measure the amount of service you require.
If you’re regularly in and out of the doctor’s office, you may benefit more from higher premiums and a lower deductible to receive coverage sooner. On the other hand, if you’re in good health and receive medical services once in a blue moon, you’re better off with an HDHP. Not only will it cost you less over time, but if you run into an emergency or unexpected expense, you’ll have an HSA to fall back on.
By narrowing down what services you value the most, you can determine which type of deductible will work best for you. Decide what you’re comfortable with, which plan has your primary care physician in your network, and from there, you can compare prices and coverage with other policies in the healthcare marketplace.