How Does a High Deductible Health Insurance Policy Work?

October 3, 2018

If your employer offers a high deductible health insurance plan, you should know how it works. At some places of employment, it’s the only option as the cost of healthcare is then pushed onto the employee rather than the employer. Some employers offer both options, giving the employee the choice.

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Before you make any choices, you should know what you are facing if you take the high deductible health insurance plan.

You Pay Lower Premiums

The first thing to note about high deductible health insurance plans is the lower premium. This should be seen as a benefit as less money is coming out of your pocket each month. Your premiums are what you pay to have the insurance. Whether or not you use the insurance, you pay the premiums. If you don’t pay them, you lose your insurance coverage.

If you have insurance through your employer, they may cover a portion of your premium. Some employers provide 100% premium coverage for the employee, but not the employee’s dependents. Other employers split the cost with you in varying increments.

You Have a High Deductible

As the name of the policy suggests, you will pay a high deductible. This is the amount of your medical bills that you must pay before the insurance will start covering charges. For example, if you have a $5,000 deductible, you must pay the first $5,000 of your medical bills before your insurance company will look at the charges.

The amount of the deductible will vary by health insurance company. You should only take a deductible that you know you can cover. Even if you are healthy today, it doesn’t mean that you’ll remain that way forever. If something happens, you don’t want to be afraid to go to the doctor because you won’t be able to afford the cost.

The insurance company will start covering their portion of covered charges once they see that you have met your deductible. For example, if you have 80/20 coverage, your insurance company may cover 80% of the charges that exceed your deductible, while you are responsible for 20% of it. Most insurance policies have an ‘out of pocket maximum’ though, which helps to limit the amount that you must pay.

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Turning a High Deductible Insurance Plan Into an Affordable Plan

If you have a high deductible insurance plan, don’t make the mistake of avoiding your medical care. Instead, try the following tips to keep it as affordable as possible:

  • Find out what you can have done free of charge. Many high deductible policies allow routine physicals, mammograms, colonoscopies, and vaccinations. Take advantage of these opportunities. If you do have anything wrong with you, hopefully, you can catch it early by going for routine care. This can help keep your medical costs down.
  • You may have access to a Health Savings Account. The HSA helps you save money for future medical bills on pre-tax dollars. You don’t even pay taxes when you withdraw the funds, but you may only do so for covered medical expenses. Even the interest you earn on the account is tax-free. Deposit as much as your plan allows into your HSA to help make your medical bills more affordable.
  • Shop around to get the best rates – If you aren’t getting insurance through your employer, shop around to find the best insurance rates. Just because two companies offer high deductible health insurance policies doesn’t mean that they are identical. One may have a $500 premium while the other may have a $300 premium. You won’t know the difference until you shop around and ask.
  • Find coverage that includes your doctors. If you have a choice when choosing insurance, find one that has your current doctors in its network. If your doctors aren’t in the network and you are unwilling to change doctors, you may have to shop around for a different policy. Out of network coverage even on a high deductible insurance policy usually offer much lower benefits than in-network coverage.
  • Know when you meet your deductible. If you find that you met your deductible, make it a point to schedule any other medical procedures that you were putting off. If you keep the procedures within the same coverage period (usually the calendar year), you’ll have more coverage since you already met your deductible. This means less money out of your pocket.

A high deductible health insurance policy may sound scary at first, but it can save you money in the end. Rather than paying the premiums upfront, you get to keep some of your money in your own pocket until you need medical care. When you do use the policy, you’ll pay quite a bit of money, but if you repair right with an HSA, you may be able to avoid some of the financial burden.

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