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While buying health insurance plan, you are always confused about health insurance deductible. It can be really confusing to understand if a low deductible health insurance plan or high deductible health insurance plan will work.
Think again. If you thought that a plan with low monthly premium will be better for you. For instance, you went buying a low premium health insurance plan- The Bronze Plan (60% premium and 40% out-of-pocket). You will end up paying a high insurance deductible.
So, what can you do?
The essential thing is your frequency of healthcare requirements.
Wait… before we got into the details of which deductible serves better purpose for whom, there is one basic question that needs answer.
What is health insurance deductible?
There are basically four types of health insurance plans available in the health insurance marketplace of USA. Platinum 90-10, Gold 80-20, Silver 70-30, Bronze 60-40. The figures 10, 20, 30, 40 are basically the percentages you will pay out of your pocket before your health insurer will come and pay for your medical costs.
Wikipedia states,
“Deductible is the amount of expenses that must be paid out of pocketbefore an insurer will pay any expenses”.
You also need to understand Health insurance plans with its other paraphernalia well. You will need to understand what is a copay, coinsurance, out-of-pocket payments etc.
Copay
A fixed sum you will pay for your health care attendance. Usually, your health insurance company mentions the sum in the beginning of the enrolling.
Coinsurance
The lower monthly premiums typically calls for higher coinsurance. It is the amount you share with your insurer after you have cleared your deductible.
Out-of-pocket maximum
It is the first amount you pay yourself before your health insurance company comes to chip in its share.
Understanding High Deductible health insurance can be the answer
Case 1– You need to visit the health care physician regularly. You have a Bronze plan. This means you are going to first spend 40% of your medical cost. Lets say, you have a medical cost of $10,000. You now fall under high deductible plan, as you will first pay $4,000 for you medical treatment. Next, you are left with $6000 to pay where, copay is $1,500. So, in total you have paid $5,500 from out-of-pocket. Plus 30% of your coinsurance means 30% of $4,500- you pay $1350 more. So, the sum total you pay is $6,850.
Think… Is it the right plan for you?
Let’s look at low deductible health insurance plan
Case 2– Instead you paid for a gold plan. Your health insurance premium is 20% more than Bronze plan.
Wooh! That’s too much!
Wait… Hold on!
Your 20% more on premiums is divided by 12. So you pay 1.6% extra every month. Let’s assume you needed a physician three months after. You would have paid 4.8% extra premium than your bronze plan. So, you now are under low deductible plan.
For the same medical cost of $10,000 US, you now pay $2000 as your deductibles, $750 for your copay, and share 30% of the remaining cost with your health insurance company (30% of 7250 is $2175).
Hence, while in Case 1 (high deductible health plan or HDHP), you paid $6,850 out of pocket, for Case 2- Low deductible plan, you will be paying $4925. You have saved $6850 – $4975 = $1875 through a low deductible plan, even when you apparently paid more monthly premium.
Well, if you thought everything looked sorted, you need to check further…
Which plan you should take does not solely depend on high deductibles and low deductibles. It depends on how much medical expenses you will incur. In case you need regular medical attention, a low cost health insurance plan with an HMO works to your benefit. However, if you rarely visit a physician or a buy prescription drugs, it is better you go for high deductible health plan (HDHP).
So, the next time you got confused about which plan will share your deductibles maximum, understand the concept of high deductible health insurance plan and low deductible health insurance plan better. Your confusion will be all taken away.
