In 2021, healthcare spending in the United States reached $4.3 trillion. Without health insurance, consumers would’ve shouldered a massive chunk of those costs.
Health insurance, after all, protects the insured from unexpected, exorbitant medical costs. It also provides free preventive care and makes treatments and medicines more affordable.
So if you don’t want to pay for all your healthcare costs on your own, it’s time to get insured. How much you can save depends on your health insurance deductible, though.
We’ll discuss the most crucial facts you need to know about deductibles below, so read on.
What Does Health Insurance Deductible Mean?
A health insurance deductible is an amount paid by the insured before the policy kicks in. It’s a yearly out-of-pocket cost based on a portion of the cost of covered healthcare services. Once paid for, the health insurance plan covers the rest.
How Does a Deductible Work?
Suppose you pick a health insurance plan with a $1,500 deductible. You must pay that $1,500 first to “unlock” the rest of your policy’s coverage benefits. After shouldering that amount, your healthcare plan covers the remainder.
Some healthcare insurance plans may have multiple deductibles. For example, the deductible for healthcare services may be separate for prescription drugs. You must pay both before your insurer picks up the tab for either.
Is a Lower Deductible Better?
A low-deductible health plan (LDHP) has a lower annual deductible. If you choose this type of policy, you pay less upfront before your insurer starts covering the tab. The downside is that you pay higher monthly premiums.
A lower deductible may be better if you’re part of the 60% of U.S. adults with a chronic health condition. It makes sense since you likely must see your doctor more often and have more drug expenses. With an LDHP, you meet the deductible sooner and let your insurer pay for the rest of your needed services and meds.
What About a Higher Deductible?
High-deductible health plans (HDHPs) have annual deductibles higher than LDHPs. As per the Internal Revenue Service, individual HDHPs have a deductible of at least $1,400. For families, it should be no less than $2,800.
The upside to HDHPs is their lower monthly premiums. Some plans also allow you to open and fund a health savings account (HSA). You can click here for more info on various health plans, including those qualified for HSAs.
An HSA is a tax-advantaged account that can help you save on qualified medical expenses. These include dental treatments, weight loss programs, and nursing care. You can also use your saving for eye exams, eyeglasses, and hearing aids.
Aside from tax incentives, an HSA lets you withdraw money for any reason once you’re 65. You can use it as a source of retirement income without tax penalties.
Start Comparing Good Healthcare Plans Today
Remember: People in the U.S. pay twice as much for healthcare as those in other wealthy countries. In 2021 alone, its per capita health spending was nearly $5,000 more than Germany.
That’s why it pays to get a policy with a health insurance deductible that suits your needs. If you’re older or prone to illnesses, get an LDHP. If you’re otherwise healthy but want an HSA, choose an HDHP.
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