| If you’re shopping for health insurance, the two most important plan costs are your premiums and deductibles. Your premium is the cost of coverage. It’s the bill you pay to your insurance company to keep your plan in effect. Usually, premiums are paid monthly, but some short-term health plans require you to pay the entire premium up front. A typical, say, individual PPO health insurance premium for a woman in her forties who is single and in good health can run anywhere from $100 to $600* per month. If she is married, and has an individual PPO health plan that also covers her husband and two children, the premium may run $250 to $1,100* per month.
Your deductible is the amount you must pay for medical expenses out of your own pocket before your insurance coverage begins paying.Deductibles are usually quoted on a yearly basis. An individual health plan’s annual deductible can range from $250 to several thousand dollars.
Health Insurance Premiums: What You Get For Your Money. Your premium is a good measure of how much health insurance coverage you actually have. The more you pay for your premiums, the more coverage you have. It works the other way too -- paying less for your health plan means less coverage. For example, let’s look at the premium difference between an HMO and a PPO health plan.
The PPO plan has more expensive premiums, but provides a broader range of coverage. With a PPO plan, you’ll be able to go to any doctor or hospital and be guaranteed some coverage.
On the other hand, you’ll pay less per month for an HMO plan. But your coverage is restricted to a specific health care provider network. If you get care from a doctor outside the network, you won’t have any coverage at all. Spending a bit more to get preventive care coverage is usually worth the extra money, also.
Take the example of the women in her forties from the first section of this article. If she paid $200 per month she’ll likely have preventive care coverage for routine doctor’s check-ups, physicals, and visits to her OB/GYN.
But if she chooses a catastrophic, major medical plan that charges premiums at $100 or lower, that plan might omit preventive care coverage because of the low monthly cost.
Generally speaking, once you are accepted into a health insurance plan, you keep your coverage as long as you pay your premiums. In fact, most states have laws that prohibit health insurance companies from canceling your coverage as long as you keep sending in premiums.
Health Insurance Deductibles: Is Lower Always Better?
It’s tempting to think so, but opting for a plan with the lowest deductible is not necessarily the wisest choice. Another way to think of your deductible is as an amount of risk you’re willing to assume -- that is, how much you’re willing to pay out of your own pocket for your medical costs. The more risk you can afford to take on by paying a higher deductible, the less risk your insurance company assumes in insuring you, so naturally they will charge you less for your health insurance plan. This is why health plans with high deductibles have lower premiums. Using the hypothetical woman as an example again, let’s say she buys an individual health plan with a low, $250 annual deductible. This means she wants to assume very little risk and pay very little out of her own pocket for health expenses -- but her monthly premium will easily be more (and most likely a lot more) than $100. If she purchases an individual HMO health plan with a high $2,000 deductible, she’s willing and financially able to accept a much higher degree of risk. She’ll pay all her medical expenses up to $2,000, but she’ll have much lower premiums than with the $250 deductible.
In choosing your health plan, ask yourself: Would you rather pay more each month in premiums? Or would you rather pay more when you receive medical care?
For some people, this is an easy question to answer. If you’re in reasonably good health, and have some money saved that you could tap in a medical emergency, you may be better off getting a high deductible plan and paying lower monthly premiums.
And since some health plans “waive the deductible” for certain forms of routine care, such as vaccinations and annual physicals, you may be able to see your doctor regularly for check-ups for just a small copayment (say, $15). In the high deductible scenario, you’re basically betting that you won’t need any expensive medical care in the coming year. But if a serious accident or injury strikes, you know you can afford to meet your deductible and let your plan start paying a majority of your bills. For other people, having a health plan with low deductible makes more sense. If you have a chronic medical condition that requires you to have frequent treatment, or work in a profession with a high risk of injury, it may be financially wiser for you to pay a higher monthly premium. |
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