With the rising costs of living, you’ll want to get an affordable health insurance plan that fits your needs. In most cases, the higher the monthly premium, the lower the deductible, and a low premium usually means a high deductible. Although health insurance is always a balancing act, there’s much more to consider than insurance premiums and deductibles when deciding between health plans.
Low premium health plans were coined to urge healthcare consumers to shop around. The logic is that being responsible for more of your initial medical costs should encourage you to find low-cost providers, which would save your insurer money. You, on the other hand, would benefit from lower monthly premiums.
Low-premium health plans are typically those that have lower monthly premiums but may also have higher out-of-pocket costs, such as deductibles, coinsurance, and copayments. In exchange for the lower premiums, you may be responsible for more of your medical costs. High-premium health plans usually provide more comprehensive coverage and may have fewer out-of-pocket expenses, but can also cost more on a monthly basis. It is up to each individual or family to decide what type of plan best fits their budget and lifestyle.
Besides featuring lower deductibles and more predictable costs, high-premium health plans usually offer more generous coverage. The downside is that you can find the higher insurance premiums much harder to fit into your monthly budget.
Comparing health insurance quotes is one of the best ways to find affordable health insurance. Although you can use online services like First Quote Health to compare quotes, don't make your decision at the expense of your well-being. Below are factors to consider when choosing between high and low health insurance premiums.
Key terms to understand
Knowing a few basic health insurance terms could help you understand the different plan types better, leading to a more sound decision.
Deductible
Your deductible is the amount of money you have to pay for your healthcare before your insurance kicks in. Deductibles will usually vary depending on the policy, but not all plans have a deductible. Your insurer should start covering a larger portion of your medical costs once you’ve met your deductible.
Premium
Premiums are the payments made to an insurance company in exchange for coverage. Generally, the higher your premium is, the more coverage you will receive under your policy. Different types of insurance policies have different premiums depending on the type of coverage included and how much risk is associated with it. It's important to know what premiums you are responsible for and when they need to be paid in order to stay covered.
Out-of-Pocket Limit
Your out-of-pocket limit is a cap on the amount of money the insured has to spend, excluding premiums, on healthcare for the year while within his/her insurance network. Once you reach your out-of-pocket limit, your insurer must pay 100% of the costs associated with covered services.
What’s the difference?
Although monthly premium costs vary, high-deductible plans tend to have lower premiums than low-deductible plans. Deductibles are therefore the obvious difference between a high and low premium. Some low premium plans, particularly those with the highest deductibles, have deductibles that are close to their out-of-pocket limits.
Also, your eligibility for a health savings account (HSA) is affected by plan type. Only those with qualifying high-deductible plans are eligible for these tax-advantaged accounts. If you have private health insurance, an HSA allows you to direct a limited amount of pre-tax dollars into the account for medical expenses.
However, you don’t have to be a private health insurance subscriber to open and contribute to a health savings account. Employers can also contribute to their employees’ HSAs in the case of company-sponsored health insurance. They may even make as much contribution as their employees, which could lead to considerable pre-tax savings.
Besides earning interest, HSA money can be invested in mutual funds or stocks and used on any of the healthcare expenses defined by the IRS as qualifying. Your deductible is one such expense. Since the money in your health savings account isn’t taxed, it can help you set aside some money for your medical costs and reduce your tax burden as well.
Who should consider a low premium health plan?
Generally, a low premium means high deductibles. High-deductible health plans can save some consumers money even though they may involve greater out-of-pocket costs than their counterparts. These plan types can be right for those who:
- Are healthy and generally less prone to injury or sickness
- Can afford to pay their deductibles on time even when faced with unexpected expenses
- Can make significant monthly contributions to their health savings accounts
- Are of sound health and would like to use HSA as a way of investing or saving money
Who should consider a high premium health plan?
High insurance premiums usually mean low deductibles. Despite the higher premiums, low-deductible plans make medical expense more predictable and can be the better option for many consumers over time. These plan types can be right for those who:
- Have a chronic health condition or need frequent medical care
- Have small children, are already pregnant, or are planning to conceive
- Are considering reparative surgical procedures like hip or knee replacement
- Take expensive prescription medications
- Participate in sporting activities that pose high risks of injury
When it comes to health insurance, low premium health plans are typically those that have lower monthly premiums but may also have higher out-of-pocket costs. High premium health plans usually provide more comprehensive coverage and may have fewer out-of-pocket expenses, but can also cost more on a monthly basis. It is important to consider both the advantages and drawbacks of a low or high premium health plan when making your decision. Ultimately, the right choice will depend on your individual needs, budget, and lifestyle.
You don’t have to compare health insurance quotes to sign up for health insurance. But with the array of options available, choosing the right health plan is understandably difficult. Additionally, you run the risk of losing your coverage and being penalized for not having health insurance if you don’t pay your premiums.
While your decision is personal and should be based on your healthcare needs, getting the required medical care when it’s needed is best for both your health and finances. Having a high-deductible health plan is better than lacking coverage, especially when faced with a substantial medical bill. This should not, however, keep you from seeking a more affordable health insurance plan.
There are many services that can help you compare health insurance quotes. One such service is First Quote Health, which only needs your zip code to let you compare the top rates from the best health insurance companies in your area instantly!