Health insurance deductible. What is it’s meaning and how does it affect your medical coverage? We’ll help you understand how it impacts your benefits and explain whether it is best for you to have a high or low deductible on your health care coverage. Each policy is different and of course each individual or family situation is different.
What Is A Deductible And How Does It Work?
Quite simply, it is the dollar amount that you are responsible to pay if you have a major medical claim. Typically, these types of claims include inpatient or outpatient hospital bills, ER charges and certain other expenses. The insurer will generally pay a large portion (or sometimes all) of the remaining charges.
There usually is not a lifetime cap on benefits paid unless it is a short-term plan. And on short-term plans, the cap is often around $1 million, which is usually sufficient. However, many short-term plans only offer $250,000 of benefits, but you can apply to renew the contract and a new lifetime amount will be provided.
If you have a comprehensive health insurance policy, which is sometimes fairly expensive, many of your medical bills will not be subject to high out of pocket costs. For example, most “copay” policies have a specified amount (usually between $15 and $40) that you pay for a covered office visit. Although there may be a limit to the number of covered visits allowed per year, most plans allow for unlimited covered visits.
Qualified preventive office visits and expenses would not have to meet a copay or any type of waiting period. Often diagnostic tests and Urgent-Care expenses have small copays also, especially on HMOs. For children, their “well-check” examinations will not cost anything since it is covered at 100%.
Prescriptions work very similarly. A catastrophic medical plan will either exclude RX benefits or force you to meet a deductible before any benefits are paid. But a comprehensive policy will feature copays that allow you to pay just a small portion of the actual cost of the prescription (non-generic). Generic prescriptions are generally so inexpensive that you often pay those expenses yourself.
For example, if your cost at Krogers or Costco is only $6, you would not bother to submit it for a claim if you had to pay $15 anyhow. Of course, a non-generic prescription would be more costly and you probably would use your policy. The copay for brand-name drugs is usually going to cost more, so ask your physician to prescribe the cheapest available drugs.
What Is The Best Deductible To Have?
The best option is the one that allows you to pay the lowest possible amount on the combination of your medical insurance premium and out of pocket expenses. We’ll create a few scenarios to help you understand the concept.
If you are very healthy, have few medical expenses and no serious physical conditions, a higher one is your best choice. For example, by having a $5,000 deductible on the large claims instead of $1,000, you may save as much as $2,000-$4,000 per year, depending on the number of persons that are insured. Thus, the meaning of this is if you were to meet your deducible once every five years (which is much more often than expected with healthy insureds), you would pay $8,000 more in deductibles but perhaps save as much as $10,000 to $20,000 in premiums.
However, lower deductibles make more economical sense if the risk is higher that you medical expenses will reach or exceed your stated amount. For example, even if you save $3,000 per year with a higher deductible, if your out-of-pocket expenses are more than the savings, you are better keeping it low. Essentially, each situation is different, and also your health can change quickly, which would impact any potential savings. In fact, you may be forced to stay with your current company if you develop a chronic condition.
What Are The Highest And Lowest Deductibles Available?
Most large insurers will not offer options lower than $500. Occasionally, a $250 option may be available. But the rate will be very high, and even without any issues, the rate may not be competitive. You may be paying $350 per year to save only $250. Many Blue Cross plans across the country have low amounts. And of course, HMOs often have $0 options.
Higher options are much more popular. The $2,500 and $1,000 choices are among the favorites of individuals and families that purchase their own private medical insurance. However, most companies offer $5,000 options and a few allow you to pick deductibles as high as $25,000. The rate will be low but your risk will be quite high. Typically, we don’t recommend anything above $10,000. The incremental decrease in premium is not that much to warrant the risk.
Can I Ever Change The Deductible On My Health Insurance Plan?
Yes and No. OK…I’ll explain. Usually, on the anniversary date of your policy, you can request a change. However, you may have to answer some medical questions to qualify for a change, especially if you want to lower the amount. Naturally, if you have any surgeries planned, you will not be granted the request.
Typically, if you have no medical problems, you can change deductibles. And, you can also change companies. Of course, if you change carriers, you need to secure an underwritten offer first, for your protection. Otherwise you risk cancelling one policy and not being able to obtain that same rate again if you were treated for a serious illness.
How Many Times Per Year Do I Have To Pay It?
Most medical insurance policies limit one per person per year. If there is more than one person insured under the plan, it is possible that the maximum may be increased to two (and rarely three) deductibles. But generally, the deductible is satisfied “per year” instead of “per occurrence.” A common exception is short-term contracts through selected carriers. It’s possible you could pay multiple times within a policy period. And yes…that could get expensive. But the price will be less.