Health insurance deductibles can be difficult to understand and navigate if you’re not armed with all the relevant, correct information.
In this article, we outline all the information you need to understand what deductibles are, the advantages and disadvantages of a high deductible, and how to choose a deductible that works best for you.
What Is A Deductible?
A health insurance deductible is a predetermined amount of money you need to pay for your own healthcare before your insurer will begin sharing the costs. In other words, it’s the initial portion of your healthcare you need to cover annually before your insurance kicks in.
Each healthcare plan is different, but the idea remains the same across providers. Once your deductible is met, your insurer will start covering costs related to your healthcare within the terms of your specific plan.
Your deductible amount depends on your insurance provider and selected plan. It will be specified as an annual amount, meaning you need to meet it each year before your insurance coverage becomes more comprehensive.
For example, if you have a deductible of $1000, you’ll be responsible for paying the first $1000 of your medical expenses in a given year before your insurance starts helping you cover costs.
Types Of Deductibles
Choosing the right type of deductible is important because it can make the difference between healthcare becoming accessible or inaccessible to you that year.
There are a few deductible types you need to consider when looking at your options. You can choose between individual and family deductibles, and you can choose between a high and low deductible on most health plans. Let’s go over these in more detail so you can make the right decision.
Individual And Family Deductibles
An individual deductible applies to an individual health insurance plan where your qualifying payments towards your own healthcare go directly towards reducing your deductible. When you reach your minimum deductible amount, your health insurance provider will start contributing towards your costs.
Family deductibles are a bit more complicated. There are two types under this umbrella, which are called embedded and aggregate deductibles.
An aggregate deductible health plan has a single deductible attached to it for your whole family. This means that all out-of-pocket health costs for the whole family are applied toward your deductible. However, note that the deductible itself will be higher in this case when compared with an individual deductible.
An embedded deductible has individual deductibles for each member of the family. When each family member reaches their deductible, the insurance plan becomes active for that family member and begins covering their healthcare services according to the terms of the plan. All other family members will need to continue paying their costs until their deductible is met.
High And Low Deductibles
You’ll have the option of choosing between a high or low deductible when you choose your insurance plan. A high deductible reduces the monthly cost of your policy, while a low deductible increases the monthly cost. However, with a high deductible, you will need to pay more for your medical services before your insurance kicks in.
So, it’s clear that the risk when choosing a high deductible to lower your insurance premiums is that you may struggle to afford life-saving care when you need it.
Factors To Consider When Choosing A Deductible
The most important factor to consider when choosing your deductible is your overall health. If you’re quite healthy and don’t often need to access healthcare services, you’re less likely to be affected by a high deductible. You will, however, benefit from the lower monthly premiums.
If you need regular access to healthcare services, it makes more sense to opt for a more expensive monthly premium and a lower deductible. This way, you will be able to factor in what you’re spending monthly on healthcare to your budget and avoid paying higher out-of-pocket costs.
You should also consider your financial situation and how much risk you can afford to take. Choosing a cheaper monthly plan always comes hand-in-hand with opting for higher out-of-pocket costs due to a higher deductible. If it makes more sense for your financial situation for you to have one predictable cost each month, rather opt for a lower deductible and a higher monthly cost.
The Advantages Of Higher Deductibles
The first and most obvious advantage of a higher deductible is lower monthly premiums. This helps you reduce your monthly expenses and is a relatively safe option if you’re healthy and don’t expect to require frequent medical attention.
Ultimately, you save costs over time, even if you do need to access healthcare services and pay your deductible. This only applies if you don’t need any major healthcare interventions over a long period of time, such as you would need for managing a chronic illness.
A higher deductible gives you greater flexibility and control over your healthcare expenses. Having lower monthly premiums can give you the breathing space to put some money aside each month, which you can either use for meeting your deductible or can grow in savings if there is no need for you to meet your deductible.
The Disadvantages Of Higher Deductibles
The first disadvantage is that you have higher out-of-pocket costs when you need to pay for medical services. Although you can perform a risk assessment based on your current healthcare needs, you can never be 100% sure of what your needs will be in the coming year. There’s always the chance of having large unexpected healthcare needs.
Next, you may have limited coverage for lower-cost services based on your plan type. Higher deductible plans usually have limited access to coverage for routine checkups, preventative care, and minor treatments.
These plans can also cause cash-flow concerns if you face a sudden large expense. You may face financial strain if you need to cover large out-of-pocket costs, or even worse, you might delay necessary care because your insurance doesn’t immediately cover the treatment you need until your deductible has been met.
What Is A Good Deductible For Health Insurance?
A good deductible depends on your exact needs. A deductible of around $1400-$1500 annually is considered a high deductible, while anything below that amount is considered a low deductible.
If you have family coverage, a low deductible is anything under $2,800 annually.
How To Choose The Right Deductible For You
Choosing the right deductible for your needs entails doing a personal risk assessment. Ask yourself the following:
- How often do you get sick?
- How often do you require medical intervention?
- And how much are you willing to spend on insurance monthly?
Once you have those answers, be honest with yourself about how much you would be able to afford if you need to meet your deductible to access healthcare services. It’s of the utmost importance that you opt for an insurance plan with a realistic deductible so that you can access the care you need.
What To Do If You Can’t Afford A High Deductible
If you can’t afford a high deductible, there are options. Your first and most obvious option is a low deductible plan, but you’ll need to be able to afford a higher monthly premium to use this option.
If you’re already on a plan with a high deductible and need to access medical treatment, you can negotiate a payment plan with your urgent care or healthcare provider. This way, you can access the treatment immediately and pay off your deductible directly to them over a set amount of time as per your agreement.
Another option is to contribute towards a health savings account or HSA. These accounts allow you to set aside pre-tax money specifically for healthcare expenses. This gives you a lump sum that can help you meet your high deductible if and when you need to.
If you need urgent care and have a high deductible you need to meet, using your savings is an option to do so. It’s likely not what you planned on doing with your savings, but if you have access to the funds, it’s better to use your savings than enter a payment plan with your provider. They will likely charge you interest over time, which means you end up paying more than what your deductible actually is.
Ways To Get A Lower Deductible
If you haven’t committed to an insurer yet and want to get a plan with a lower deductible, shop around and see what options are out there. Some insurers offer more affordable deductibles and have a wider range of plan options for you to choose from. At Enhance Health, we can help you find the right insurance policy for your needs with a deductible that suits your budget.
As you now know, you can opt for higher monthly insurance premiums in exchange for lower deductibles. This trade-off can make the deductible more affordable and your overall cost of healthcare more transparent, so you know you can always access the care you need when you need it most.
Next, take advantage of any discounts or rewards programs offered by your insurer. Sometimes, your insurer will reward you for advantageous behavior, such as taking good care of your health by exercising regularly, eating healthy food, and engaging in preventative healthcare.
If you’re still looking for an insurer, make sure you sign up with one that offers a rewards program so that you can optimize your healthcare spending in a way that benefits you.
Maintaining a good claim history can also help lower your deductible. When an insurer can see that you’re not a high-risk candidate to cover, they may offer you a lower deductible to get you to sign on as one of their clients, because they can safely cover you without making a loss.
Lastly, if you’re unhappy with your current deductible, shop around for a new insurer with a more favorable deductible. Take into consideration all the advice given above when choosing your new insurer and deductible.
Navigating the world of insurers and deductibles can feel like a minefield, but you’re now armed with all the relevant information to make the best choice for your pocket.
If you’re struggling financially and need help accessing insurance with affordable deductibles and monthly payments, get in touch with Enhance Health. We can help you find fast and affordable health insurance with plans starting as low as $0 per month.
Whether you need individual or family insurance, or need insurance for a special enrollment period because you lost your previous insurance, we’re here for you. We can take you through health insurance options that cater to your individual needs, and provide support and guidance throughout the process. Contact us today for more information.