How Health Insurance Deductibles Work

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by Jeffrey A.
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A deductible is defined as the amount you pay for your health insurance coverage before the insurance begins to pay. For instance, if your new insurance plan has a $500 yearly deductible, you’d have to pay that amount in order for the insurance plan to help you in covering the cost of its medical services.

How Does a Deductible Compare with Copayment?

Once you have paid your insurance plan deductible, you will most likely pay something called a copayment for the services provided. A copayment is essentially a fixed amount of money that you’d pay upfront for every visit to the doctor’s office or when you have to fill a prescription. The cost of a copayment is determined by how high or low monthly premiums are. Plans with low monthly premiums tend to have higher copayment costs, and those with higher monthly premiums will have lower copayment costs. 

Usually, an insurance plan will have a copayment that you have to pay for every visit. However, that is not the case for every insurance plan. Some opt towards having different ways of paying for the services provided. For example, there are insurance plans in which you only have a deductible/coinsurance payment system, and there are others where you must pay out-of-pocket for the intended services.

How Does a Deductible Compare with Coinsurance?

Besides having to pay a copayment for services alongside your deductible, insurance plans can include something that is called a coinsurance into their payment system. What is coinsurance? Coinsurance is a varying percentage of the costs you pay after you’ve paid the deductible. 

To put it another way, if your coinsurance was 15% then you would be paying 15% of the total costs of your health insurance coverage. As a result, your insurance plan would cover the remaining 85% of your medical bills. It is also important to realize that the higher your copayment is, the higher the share of the cost you would be paying. 

Can You Obtain A No-Deductible Insurance Plan?

It is possible for an individual to obtain an insurance plan with no deductible. Someone who chooses to enroll in a no-deductible insurance plan will no longer have to pay a minimum amount for their health coverage. In this type of plan, the health insurance company pays for all of your visits, emergency care, and any related medical services. 

Although no longer required to pay a minimum amount, an individual would be paying more for a no-deductible plan in comparison to one with a deductible. With this in mind, you are most likely to find this sort of plan with an employer rather than standalone. 

The benefit of obtaining a no-deductible plan through employer-based health coverage is that the high fees of insurance are managed by the company since they cover the majority of those costs. In addition, when applying for a full-time job, the employer is obligated by law to provide coverage to their employees. 

How Health Savings Accounts Affect Your Deductible

A Health Savings Account (HSA) is defined as a personal savings account utilized exclusively for qualified health insurance expenses. To qualify for an HSA, you must enroll in what is called a High Deductible Health Plan (HDHP), which is an insurance plan that has a high minimum deductible for medical expenses. The benefits of creating a Health Savings Account are numerous.

Not only do they aid patients with high deductible plans to cover any out-of-pocket cost, but they also allow an annual roll-over of unspent money into your account the following year. Additionally, an HSA will cover most medical, dental, and mental health services that you may require. The convenience of owning one of these accounts is that it makes your life easier in terms of saving up money without having to deal with high tax rates. Furthermore, it provides you with a debit card that simplifies the process of paying any current expenses. 

The downside of owning an HSA account is partly due to the mandated requirement of owning a high deductible plan. Under these circumstances, it could become difficult for an individual to keep up with costs, thus creating a financial burden upon them. By the same token, the monthly maintenance fees together with the tax fees of withdrawing before a certain age only adds to the burden of owning an account. 

Types of Deductible Plans

When looking for a new health insurance plan, is it important to note that these insurance plans come in two types: high-deductible and low-deductible plans. The costs of the deductibles vary greatly and are dependent on different factors such as the medical costs and premiums of the company. In effect, these factors will affect the consumers’ choice when deciding on a deductible plan. What do these deductible plans offer? 

High-Premium Deductibles

In comparison to a low-premium, high-deductible plan, owning a high-premium, low-deductible plan means that ]you will be paying less on your deductible, but you’ll be paying much more in monthly premiums. The benefits of owning such a plan are seen in individuals that find themselves going to the hospital frequently to treat a chronic condition, are pregnant, or find themselves constantly injured. As a result, these types of plans prove to be better for long-term situations. 

Low-Premium Deductibles

In a low-premium deductible plan, the consumer pays a higher than average deductible in comparison to the traditional plan. While the monthly premium is lower, you are responsible for paying the higher cost associated with your plan before the insurance company is allowed to cover the remaining, and thus lower cost, share. Fortunately, with the use of a health savings account, it becomes easier for an individual to pay for their high deductible plan.

Which Deductible Should You Choose?

Before choosing to settle with a particular type of deductible plan, you should consider several factors. Between the medical services offered, the treatments you require, and the premium rates, there are subtle differences between a high-premium and a low-premium deductible plan that should guide your decision making. 

People that choose a low-premium, high-deductible plan tend to generally be healthy and don’t find themselves going to the hospital often. 

In contrast, individuals that require frequent and substantial medical attention will find themselves settling with a high-premium, low-deductible plan. These plans benefit people with chronic illnesses that need regular treatment, therapy, and hospitalization since it saves them more money. 

Where to Find The Right Plan For You

In the event that you’re in need of a deductible plan that suits your best interest, you will need a website where you can search and compare the rates of the available plans. Check out our online form to get a personalized quote and compare your plan options.


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