Higher deductibles or higher premiums?

Higher deductibles or higher premiums, that is the question. It is an important question when comparing health insurance policies. Unfortunately, there is no one size fits all answer to that question. The best type of health insurance plan for you will depend on you and your family’s individual needs.

Why is the deductible an important factor for health insurance?

Naturally the first aspect people review when they are looking at comparing health insurances is the premium. However, we tell our clients that the out-of-pocket expenses or the deductible is an equally important aspect determining how much you pay for your health care. The deductible it the amount of money you have to pay toward medical expensed prior to the insurance coverage. Typically, this is the most expensive out-of-pocket cost.

The difference between low-deductible and high-deductible insurance plans

The premium will indicate the difference between high and low deductible plans. A higher premium would indicate a low deductible plan, similarly a low premium plan would indicate higher deductibles.

Advantages with a low-deductible plan

Low-deductible health care plans can make it easier to predict healthcare costs and has the potential to save you money in the long term, even with the higher premium.

People who might see an advantage with choosing a low-deductible plan over a high-deductible plan would include:

  • Women who are pregnant or planning to become pregnant
  • People who carry young children on their insurance plan
  • People who are over the age of 65
  • Individuals with prolonged health conditions
  • People who require expensive prescriptions or have several prescriptions they are dependent on
  • People who participate in high-risk sports or activities

An important consideration when electing a high premium low-deductible health insurance plan is that if you are not able to pay the high monthly premiums, you will lose the insurance coverage—putting you at risk of being uninsured and subject to fines and penalties.

Advantages with a high-deductible plan

The evident advantage of a high-deductible health insurance plan is lower monthly premiums, however there is another important benefit. Only those individuals who select 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.

Which health insurance plan is the better choice

Everyone needs to be insured with health insurance for routine health care and in case of accidental injuries or illness.  The type of health insurance you choose should be dependent upon your healthcare needs and your financial position.  

Typically to assist our clients in making this decision we would suggest that younger individuals who are in a good state of health go with a higher-deductible plan with lower monthly premiums. We would suggest a lower-deductible plan to individuals who are older that may have pre-existing health conditions.

Our experienced agents are ready to discuss your health insurance options with you today.

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