During the Open Enrollment season, many consumers will face some choices about their health insurance plan: Should I enroll in health insurance now? Should I make changes to my current plan? Should I choose a high deductible or low deductible policy?
All health insurance plans on the market fall into one of four categories: Bronze, Silver, Gold, or Platinum. These categories were created to help consumers identify levels of coverage, along with an approximate pricing range associated with each policy. Like most types of insurance, plans with a high deductible will carry a lower monthly premium, and those with low deductibles will cost you more each month. A Bronze-level plan might be more affordable on a monthly basis, but a Platinum-level plan will carry a much lower deductible – perhaps even none at all.
It’s easy to see why many of you are confused about which type of plan is right for your budget!
Your deductible is the amount of money you will have to pay toward your health care, before your health insurance company begins to cover your expenses. If you choose a plan with a $1,000-dollar deductible, this means you will pay for your premiums and the first $1,000 of your medical bills for the coverage year. After you have exceeded $1,000 in medical expenses, you insurance begins to pay your bills.
A high-deductible plan often makes sense if you’re required to carry health insurance coverage (most people are), but you’re in relatively good health and don’t anticipate large medical bills. If you do choose a high-deductible plan, you could be eligible to open and fund a health savings account (HSA) which allows you to save pre-tax money to be used toward your health care expenses. This can be a valuable money-saving device.
On the other hand, you might be wary of having to cover thousands of dollars in health care costs before insurance kicks in. A low-deductible plan will eliminate that problem, but of course you will also incur largely monthly premiums.
If you’re eligible for a subsidy to help with the cost of your premiums, that is another point to consider. Depending upon the amount of subsidy you receive, you might choose to upgrade to a plan with a lower deductible. Or, you might choose to go for the high-deductible plan at very little cost to you, and take the risk of high medical bills in the coming year.
One thing to remember is that preventive care is provided by all health insurance plans under the Affordable Care Act. You can see your doctor for preventive care, while usually paying a co-pay, rather than paying full price for them and counting those expenses toward your deductible. This is good news for people who are generally healthy and only visit the doctor for preventive care.
But of course, there is always some risk inherent to these types of decisions. Take the time to assess your past health care spending, and estimate your costs over the next year, before choosing the level of coverage that is right for you.