A health insurance deductible is the amount you pay before your insurance kicks in. For example, if you have a $1,000 deductible and you need a $1,000 MRI procedure and $2,000 surgery, you will pay $1,000 out of pocket for the MRI and then $0 for the surgery.
how do deductibles affect your costs?
a health plan with a lower deductible generally carries a higher monthly payment, and vice versa.
If you’d rather pay a higher amount each month for the security and predictability of low out-of-pocket costs for high-cost health care, you may want a low deductible on your health care plan. this may be a good option if you have a chronic health condition or are at high risk for sports injuries.
If you prefer a high one-time expense in case you need high-cost medical care rather than a smaller monthly payment, a high deductible health plan may be the right option for you. This may be a good option if you’re younger and in generally good health, or if you have a health savings account (HSA), which you can use to pay your deductible with money that isn’t taxed as income. You can also have a health reimbursement account (HRA) through your employer that can pay your deductible, which can also make a high-deductible health plan an advantageous option.
high deductible health plans
A high deductible health plan is a plan with a higher deductible – the amount you have to pay out of pocket before your insurance kicks in than a traditional health insurance plan. This definition is set by the IRS and includes any health plan with a deductible of at least $1,350 for an individual or $2,700 for a family.
With a high-deductible plan, you typically make a lower monthly payment. If you have an HSA or certain types of HRAs, you can use funds from any of these to pay for your out-of-pocket health care expenses free of federal taxes.
You can only qualify for an HSA if you are enrolled in a high deductible health plan. The money you contribute to an HSA rolls over forever, so if you save money in an HSA while you work and don’t use it for several years, or until you change employers or retire, it’s still there for you . If your employer also contributes to an HSA, you can potentially get the best of both worlds with the low monthly payment of a high-deductible plan and the freedom from high out-of-pocket expenses, since they’re covered by your employer’s contribution.
Wanting to determine if combining your HSA with a high-deductible plan is a good fit for you? an hsa could be a good option if any of these are true:
- You have predictable health care expenses: You can set aside money that won’t be taxed as income to pay for these expenses
- Your employer contributes to your HSA, and your contribution leaves a smaller out- payment out of pocket than the amount you would pay with a lower deductible health plan that didn’t use your hsa
- want to save money now for health expenses when you’re older, tax-free
Understanding your health insurance costs can help you choose the best health plan for you and your family. You can find more information about the types of health plans available here.