There are many factors to consider when selecting an appropriate health insurance policy. First you’ll have to become familiar with the many companies that provide health insurance. Then there are network options and coverage packages to consider. And the Affordable Care Act (ACA) has developed a healthcare marketplace to ensure coverage even for those that couldn’t otherwise afford private health insurance. Cost is, of course, an important element, as well. And you may be aware of the fact that you can reduce the price of your premiums by selecting a policy that features a larger deductible. But what will this mean for you in the long run? How do deductibles work?
Let’s start by defining a deductible, since it is different from your premium and your co-pay. It is still an out-of-pocket expense, but it is one that you will pay in addition to the premium you already pay for your policy and the co-pays that are expected when you visit a doctor’s office or pick up a prescription. The deductible is the amount you will have to pay out of pocket for medical expenses each year before the insurance company will start to pay coinsurance on your behalf.
If, for example, you have a surgery that costs $5,000 and your deductible is $1,000 with 100% coinsurance, you would pay $1,000 and your insurance provider would pay the remaining $4,000. And since you would have paid your deductible for the year, any further medical costs accrued during the same calendar year would be paid for by your insurance provider. If, on the other hand, your deductible is $5,000, you would pay the entire amount, after which any further costs (in the same year) would be covered by your insurance carrier.
The thing to keep in mind is that your out-of-pocket expenses may not affect each other. To be clear, the money you pay for in-office co-pays may not count toward your deductible. And even with a high deductible, your insurance provider will almost certainly pay for specific services throughout the year despite the fact that you haven’t reached your deductible limit. For example, most visits to your primary physician are covered. Of course, it all depends on the particulars of your policy, but it’s important to understand what costs are covered and which will fall to you when it comes to medical expenses.
So how can you choose the deductible that’s right for you? It mainly comes down to your anticipated medical expenses. If you are relatively healthy and you generally go in only for annual check-ups and infrequent ailments like a cold or flu, for example, you can probably opt for a higher deductible in order to lower your insurance premium. On the other hand, you might have extensive and ongoing medical expenses associated with a chronic condition. In this case, you want a lower deductible so that your coverage kicks in more quickly each year. Even though you’ll pay more for premiums, you’ll end up saving in the long run as your health insurance pays your medical bills. When you understand how deductibles work and how they apply to your situation, you should be able to select the health insurance deductible that is best for you.
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