Choosing a health insurance plan is a difficult task, as you should evaluate a health plan based on several factors before deciding upon a plan. Right from accessing your health care needs and requirements to checking the overall costs of the plan to your age and work-status, you need to keep all vital aspects in mind while choosing a plan. Though there are different types of plans available in the healthcare market, here we will discuss the difference between the traditional and high deductible health plans, so that you can easily choose which plan suits you the most.
Traditional Health Plan
A traditional health plan comes with copays and deductibles, and these plans help you pay your doctor’s visits, lab tests, and prescriptions. While having a traditional health plan, you are only responsible for coinsurance until you reach your out-of-pocket maximum. Members of these plans are also required to stay within the network while receiving healthcare services or facilities to keep their costs down.
High Deductible Health Plan
A high deductible health plan comes with a high deductible that you should meet before the insurance carrier starts paying its share of your doctor’s visits, lab tests, and prescriptions. In 2020, to qualify for a high deductible plan, the deductible must be at least $1,400 for an individual and $2,800 for a family. High Deductible Health Plans are usually combined with a Health Savings Account that helps to offset the out-of-pocket costs.
Choosing the Right Plan
Selecting the health plan mainly depends upon your circumstances and financial situation. Traditional health plans will be a better option for you if you often go to the doctor or expect major medical expenses like having a baby soon because these plans have lower deductibles.
Alternatively, high-deductible health plans have a lower premium that helps you save money in the long run. Thus, this plan will suit you if you are healthy and looking to cut costs. However, you need to make sure that you have the liquid capital to manage the high deductible. So before deciding on a plan, you need to make a list of your projected health care needs over the next few years and then decide upon the plan that makes the most sense for you in terms of money.
Break-down of Health Plans Costs
While deciding between these two plans, you first need to find out the price of each plan. You can find out the total costs of the plan by adding up the annual premium cost along with the maximum out-of-pocket expenses for each plan. This will give you an estimated cost of both these plans. Besides, you should also consider the deductible amount, as this will give you an idea of the amount you have to pay before your insurance carrier starts paying.
Let’s compare the total cost of both these plans through an example. Let’s assume that you have a traditional health plan. The monthly premium of this plan is $300 along with an annual deductible of $1,000, and a coinsurance of 20%, and an out-of-pocket maximum of $2,000. Then this plan will cost you
$300 X 12 = $3,600 + $2,000 = $5,600
If you spend maximum on this plan, then you will pay copays and all costs until you reach your $1,000 deductible, and after that, you would pay 20% of all costs for the remaining $1,000 until you reach the out-of-pocket maximum.
Now let us take another example if you have a high deductible plan having a monthly premium of $100, and a deductible of $5,000, and a coinsurance of 50% and an out-of-pocket maximum of $8,000. Then, the total cost that you would end up paying will be
$100 X 12 = $1,200 + $8000 = $9,200
However, if you spend maximum on this plan, then you have to pay copays and all other costs until you reach your $5,000 deductible, and after that, you will have to pay 50% of all costs for the remaining $3,000 until you reach your out-of-pocket maximum.
Opt for the Right Plan
You need to choose a plan considering your situation. If you are healthy and visit a doctor only for an annual checkup, then the High Deductible Health Plan will not cost you much more than your premium, and the amount will be significantly less compared to the premium of the traditional health plan. Before choosing a health plan, you need to carefully assess your health, financial responsibilities, along with the risks that you can comfortably take. However, if you decide to opt for a High Deductible Health Plan, then you should also take advantage of an HSA, which is a tax-advantaged account that helps you pay for your medical expenses and significantly offset your medical expenses. You should compare all your options before finally making a choice.