Selecting a health insurance plan is one of the most important financial decisions you'll make each year. At the heart of this decision is the deductible—the amount you pay out-of-pocket for covered health care services before your insurance plan begins to pay.
High Deductible vs. Low Deductible
High Deductible Health Plans (HDHP)
- Lower monthly premiums: You pay less each month to keep the insurance active.
- Higher out-of-pocket costs: You pay more when you actually visit the doctor or need a procedure.
- HSA Eligibility: Most HDHPs allow you to open a Health Savings Account (HSA), which offers triple tax advantages.
Low Deductible Health Plans
- Higher monthly premiums: Your monthly bill is more expensive.
- Lower out-of-pocket costs: When you need care, your insurance kicks in sooner, and your co-pays are typically lower.
- Predictability: Better for those who have chronic conditions or expect frequent medical visits.
Factors to Consider
- Your Health History: Do you visit the doctor often? Do you have ongoing prescriptions?
- Emergency Fund: Do you have enough savings to cover a $3,000 or $6,000 deductible if an emergency happens tomorrow?
- Total Cost of Ownership: Don't just look at the premium. Calculate the Total Annual Cost (Premium x 12 + Expected Out-of-Pocket).
Using a tool like the Health Deductible Planner can help you visualize these costs and make an informed choice.