When you are shopping for health insurance, one important question to consider is whether to go with a high-deductible or low-deductible plan. Unfortunately, there is no blanket answer to that question. The best type of health insurance plan for you will depend on your individual needs.
Most people shopping for health insurance look first at the premium. However, out-of-pocket expenses are an equally important factor in how much you pay for health care in the long run. Your deductible is the amount you have to pay toward medical bills before your health insurance coverage kicks in. It is generally the most expensive of all your out-of-pocket costs.
The “sticker price” (premium) will let you know immediately which is a high-deductible and which is a low-deductible plan. A higher deductible means lower premiums and vice versa. However, there are other factors besides the premium to consider, and both types of plans have their pros and cons.
The obvious advantage of a high-deductible plan is lower premiums, but there is also another important benefit. Only those individuals who opt for high-deductible health insurance can contribute to a health savings plan (HSA). Health savings plans are 100% tax deductible, up to the legal limit. Withdrawals to pay qualified medical expenses are never taxed. Interest earned on an HSA is tax-deferred, and tax-free if used to pay qualified medical expenses.
Although the premiums are higher, low-deductible plans can make it easier to predict healthcare costs and may end up saving you money in the long run. People who might benefit most from this type of coverage include:
One thing to consider when choosing a low-deductible plan is that you will lose your health insurance coverage if you cannot afford to pay the monthly premiums. You may also face penalties if you don’t have health insurance. It is better to choose a plan with a high deductible than to lose your coverage.
The type of health insurance plan you opt for is a personal choice based on your financial situation and individual healthcare needs. We all need health insurance for preventative care and in case of an accident and injuries. As a general rule of thumb, to simplify the issue, a high-deductible plan may be a better choice for younger, healthier individuals with some money set aside to cover healthcare costs until the high deductible is met. A lower-deductible plan may be best for an older person with a pre-existing or chronic health condition. Speak with our experienced agent for professional help in selecting the best health insurance option for you.