How to Choose Between a Low- or High-Deductible Health Plan

Most health plans come with a deductible, which is the amount you will pay each year before the plan starts paying for healthcare expenses. Health plans can be grouped into low- or high-deductible depending on how much you pay before your coverage begins. High-deductible plans often have lower monthly premiums, while the opposite is true with low-deductible plans. Here are some tips on how to choose between them.

High-deductible plans were originally developed to encourage customers to shop around for coverage due to the assumption that a high deductible would cause customers to look for lower-cost plans that benefit both them and their employer. What has occurred is somewhat different because some high-deductible patients are avoiding care to reduce their expenses, which can be risky. Low-deductible plans offer a lower initial yearly cost to the patient, but the monthly premiums can be more than some can afford.

When looking at healthcare plans, keep in mind the following definitions:

Premium — The monthly payment required to keep your plan in force, regardless of whether you use it or not.

Out-of-pocket maximum or limit — This is the maximum amount you will pay each year including your deductible and co-pays. This limit does not include your monthly premium cost, so that must be added to calculate your maximum annual costs.

Deductible — This is the amount you have to pay at the beginning of each year before your plan benefits begin to pay. After your deductible is paid your insurer starts paying their portion of your healthcare expenses. You are still responsible for your monthly premium payment.

One advantage of high-deductible plans is some of them qualify for Health Savings Accounts or HSAs. They have tax advantages in that money can be deducted from your paycheck before tax, thereby reducing your tax liability. Or, you can take the money after tax and claim a tax deduction later.

High-deductible plans can have advantages for employees who have few medical expenses and don’t expect any unusual medical conditions in the following year. Low-deductible plans are more predictable for employees who have children, have a chronic medical condition, or are taking expensive medications.

First Day Films can assist employers with necessary communications to employees of medical programs, health insurance plans, open enrollment issues, and other human resources programs. For more information please call 833-422-7332
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