Question: Should I Choose a Traditional Health Insurance Plan or a High Deductible Plan?
Answer:
A traditional health insurance plan works on a system of copays and deductibles. The plan helps to pay your doctor's bills, lab tests, and prescriptions from the first day. There may be an initial deductible to be met, but it is usually lower. Additionally, this may not apply to doctor's visits.
A high deductible plan has a high deductible that you must meet before the insurance will start paying for your office visits, lab tests and prescriptions. In order to qualify as a high deductible plan the deductible must be at least $1000.00. The average deductible is $5000.00 dollars. Often once you have reached the deductible the insurance will kick in with one hundred percent coverage and you will no longer need to pay additional costs.
It may be a difficult decision to choose which type of plan to purchase. The high deductible plans have a lower premium. If you are healthy, and are looking for a way to cut costs this may be a great option to consider. Additionally, if you have $5000.00 available to cover sudden medical expenses, it is a good plan, because you may end up paying less even with traditional insurance.
You can make a worse case scenario plan if you are worried about how much each insurance plan could ultimately cost you. The numbers you should add up are the annual cost of each premium, the deductible for each premium and the maximum out of pocket expense for each plan. This will help you see how much you will ultimately spend and which plan is the most affordable.
For example, if you have a traditional insurance plan that costs $290.00 a month. The annual deductible is $1000.00 per month with a coninsurance out of pocket maximum of $2000.00. This plan would cost you 290 times 12 (3480) +1000+2000=6480 plus the cost of copays and prescriptions throughout the year.
If you have a high deductible insurance plan with a deductible that is $5000.00 and a monthly premium of $110.00 you would end up paying $6320.00 (110 x 12 + 5000). There would not be any additional copays for prescriptions or doctor office visits.
Many insurance companies are offering a plan that falls between a traditional plan and a high deductible plan. These plans offer copayments for doctor office visits, and a higher deductible that needs to be met. The coinsurance amount is usually more than 20%. An example of this type of plan has a monthly premium of 190.00 and a $2500.00 deductible plus the out of pocket maximum of $3000.00 on coinsurance. So the total cost would be 2280 (190.00 x 12) +2500+3000=$7780 plus any copayments that you pay throughout the year.
It is important to remember that as you consider the types of insurance you take into account the likelihood that you will be using the maximum amount. This is a good way to determine the best plan for your needs. If you decide to go with a high deductible plan you should take advantage of the health savings account, which gives tax benefits to the money you save to pay for your medical expenses.
