How to Choose: High or Low Deductible Health Insurance Plan?

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The health insurance world can be confusing. Knowing which plan is best for you individually or as a family can take time and research to figure out. Mix into the confusion the aspect of deductibles and the correct decision for each unique situation and it becomes even more cloudy.

To make certain that you are choosing the best health insurance for yourself or your family you must understand the important difference between high and low deductibles. To help take away any confusion let’s get down to the basics.

Defining the Terms

One of the best ways to truly understand the labyrinth of health insurance is to break it down.

There are certain terms that are vital to know. Take for instance the term “premium.” The premi-um is the monthly cost that you are going to have to pay out-of-pocket on a monthly plan. This monthly amount doesn’t vary with the amount of use of the insurance policy. It also has the chance of rising annually.

The deductible, on the other hand, is the amount of money that you will have to spend if the case of an illness or injury is faced. This amount of money has to be met before your insurance carri-er will begin to pay for services rendered. Once you have met your deductible the insurer will usually share the costs with you until you meet your out-of-pocket maximum.

Another term that is important to understand in the deductible world, the out-of-pocket maximum creates a cap that you will pay (not including your monthly premium) unless you use services that are not in your in-network area. Once you meet your out-of-pocket maximum and remain in the in-service zone than the insurance carrier is obligated to pay 100% of services.

Knowing the Laws

Another aspect of the entire deductible scene is knowing that the IRS is involved. If you are go-ing the route of a high deductible than you may be able to get a Health Savings Account or HSA. An HSA lets the customer save a certain amount of money each month that is not taxed. This HSA may also be contributed to by employers if you work for a company that participates in medical expenses. The HSA is dual-positive in that it allows a person to avoid taxes while setting aside money that will reduce health costs. Do be aware, though, that not all insurance plans have a HSA attached.

Due to inclusion of the HSA, the IRS has created boundaries for insurance companies to adhere to including a minimal deductible amount of $1,300 for individuals and $2,600 for families as of 2018. The maximum out-of-pocket is set at $6,550 for an individual and $13,100 for a family.

What Deductible is Best?

The question of which deductible is best for you depends on your individual situation. If you are a healthy person that tends not to need to see a doctor or you are able to meet your deductible immediately if a major illness or injury occurs, then a high deductible is a wonderful way to lower immediate costs. If you are pregnant, planning on having a family, are of an elderly age, have a history of illness, are planning an upcoming surgery or depend on prescription pills, then a lower deductible most likely suits your situation best.