Health insurance deductibles can dramatically lower your monthly premiums
Many of today’s health insurance policies contain deductibles, and it is likely that the trend towards higher deductibles will continue. Deductibles act as a cost-sharing mechanism between the insurance company and the customer, with the intention of saving money for everyone involved. Policies containing deductibles present some advantages and disadvantages that must be carefully considered before those policies are purchased.
The Basics
Health insurance policies with deductibles require the customer to pay the entire cost of treatment up to a specific dollar amount before the carrier will begin contributing. Traditionally, deductibles were only relevant to policies that contained out-of-network benefits, but are now being added to in-network services as well.
The Rationale
The justification of deductibles is easy to understand, and is logical when considered from a purely business standpoint. By requiring customers to pay for the first portion of their treatment costs, the likelihood of unnecessary procedures will be reduced, and the cost of care for each individual customer will be lower. The result is a reduction in premiums for customers and lower claims payments for carriers.
Different From a Co-pay
Deductibles and co-pays are not the same thing, but similarities do exist. Nearly every health insurance plan requires a co-payment when visiting a physician or specialist. Co-pays are smaller nominal amounts paid by the customer to the physician at the time of an office visit. Deductibles are larger sums payable by the customer to a hospital or similar facility at the time treatment is rendered, and may be equal to the entire cost of treatment in any visit. Co-pays, like deductibles, are a method of cost-sharing between the carrier and the member. Unfortunately, the aggregate amount spent on co-pays remains separate and is not included in fulfilling the deductible.
Disadvantages
Enrolling in a health insurance plan that utilizes deductibles, customers must be aware of the disadvantages and potential dangers that come from this type of policy. While monthly premiums for plans with deductibles may be lower, out-of-pocket expenses for treatment are significantly higher. Consumers should ensure they have cash reserves or credit availability sufficient to cover the entire amount of the deductible before buying this type of policy. Members must be able to quickly obtain potentially large sums of money to pay deductibles in the event of a medical problem or emergency.
Choosing a Deductible
Larger deductibles equate to smaller monthly premium payments for health insurance coverage. Ensuring that medical plan costs fit into your ordinary budget is essential to preventing financial difficulty in the future. The convenience of affordable insurance bills becomes irrelevant when treatment is necessary that first requires the payment of a large deductible. Consumers who have no emergency reserve funds and no way of acquiring large sums to fulfill their portion of medical bills should refrain from purchasing plans with high deductibles.
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