Lower Premiums or Lower Deductible: Which is better?
One of the dilemmas facing most Americans who are buying health insurance policies is to decide if they are better off choosing a plan with lower monthly premiums or a lower deductible. The lower your deductible is — the higher your premiums are and the lower your premiums cost — the higher your deductible will be. The best thing to do is to try and find a good balance. However, it all depends on your personal needs, health requirements, and budget.
A monthly premium is the amount of money you pay the insurance company for your benefits. While, a deductible is a yearly amount that must be paid by you before the insurance benefits kick in. For example, if your deductible is set at $1,500, then you have to pay for your medical needs out of your own pocket until you reach that amount. Once you reach $1,500, the benefits will start. Health care providers offer plans with all different deductibles so pick one that will work for you.
It doesn’t matter if you’re in an individual or group plan, the more bills you pay out of your pocket, the less amount you spend on premiums. If you are healthy and don’t plan on visiting the doctor often, then you might prefer to pay lower premiums.
Most insurance experts believe you’re more likely to file a claim with your health insurance provider if you have a lower deductible. To compensate for this, most insurers will increase the premiums on many low-deductible plans. To get more value for your money you may want to consider setting the deductible at about $1,000 or more. If you’d rather pay a high deductible then you may be interested in a HDHP (high-deductible health plan) or a CDHP (consumer-driven health plan) as they both come with high deductible amounts with the options of a Health Savings Account.
You might also want to consider what your co-insurance ratio is as this is how much you have to pay after reaching the deductible. One of the most common ratios is 80/20. This represents the percentage of medical expenses that you and the insurer pay. An 80/20 ratio means the company pays 80 percent and you pay 20 percent. If you decide to change this ratio so you’re paying more, such as 70/30, your premiums should be less expensive. However, you have to weigh risks against the costs.
But when deciding if high deductibles are better, you really need to know exactly what the health plan covers and what it leaves out. Generally, if you’re in good health, a higher deductible might be better as you might not visit the doctor often and you could save money on the lower monthly premium.
Those who use medical care regularly could be better off with a low deductible. Usually, a higher deductible with lower premiums ends up costing less than a low deductible and higher premiums. However, it also depends on just how high the premiums are.
Consider talking to a health insurance agent before deciding on a plan that is right for you. They will be able to help you weigh the pros and cons of a health insurance plan.