It’s a good idea for just about everyone to have a quality health insurance plan. An unexpected accident, injury or serious illness can leave a person with sudden financial hardship. Life just happens and all of us need to be prepared for emergencies. Health insurance coverage plans with either high deductibles or low deductibles are popular options. Let’s briefly explain what the difference is.
High Versus Low Deductible Plans
Individuals who have a high deductible plan pay less each month, but are responsible for a larger amount of out-of-pocket health care costs. A high-deductible plan has an annual deductible of $1,600 or more for an individual, and at least $3,200 for a family. Once the deductible is met, insurance benefits will kick-in for the rest of the calendar year.
A low-deductible plan features higher monthly payments, but has a lower deductible. The deductible can be reached sooner, allowing your health insurance benefits to be available more quickly. The downside is it will cost you more per month, a waste of money if you don’t need more extensive medical care. Also, a lower-deductible plan doesn’t offer a health savings account, a benefit only available with higher-deductible plans.
What is a Health Savings Account?
A health savings account, or HSA, is a tax-advantaged account you save for medical expenses that qualify. These include dental treatment, eye exams, eyeglasses, hearing aids, weight loss programs and prescription drugs. Withdrawals aren’t taxed if they are used for qualified medical expenses.
An HSA promotes saving money by offering valuable tax incentives. Contributions are tax deductible and any interest that accumulates is tax-free. For people 65 and older, money can be taken out for non-medical expenses, without a 20% tax penalty.
Benefits of a High-Deductible Plan
Besides a lower monthly cost, a high-deductible plan protects individuals from costly hospital stays and surgeries. Up-front costs can add up quickly when expensive medical needs arise. People who are generally healthy and don’t often use medical services benefit from lower premiums. For folks who have an HSA, some employers offer contributions to the plan as well.
Low-Deductible Plan Benefits
A low-deductible plan is a good choice for people who frequently use healthcare services. It’s beneficial for families with many dependents, as well as senior citizens at higher risk for certain health conditions. It also provides financial help to people managing chronic illnesses and women who are pregnant.
How to Choose the Right Plan
When deciding what type of plan is right for you, be sure to take your budget into consideration. What you ultimately decide really depends on how often you go to the doctor. Calculate the cost for the monthly premium and annual deductible. Take copay and coinsurance expenses into account as well. Compare your totals and see which plan is the best fit for your healthcare needs.
