Comparison: High-Deductible vs. Low-Deductible Health Insurance

High-deductible plans usually have low premiums, but they require more out-of-pocket spending in the event of a claim. Meanwhile, low-deductible health insurance plans have high upfront costs, but they offer more generous coverage. Read on to know how these two types of plans compare.

What Is a High-Deductible Plan?

Compared to a conventional low-deductible plan, high-deductible plans require policyholders to pay more money out-of-pocket for medical care. This amount of money that one pays in case of a claim is called the deductible.

High deductible plans were introduced to encourage consumers to shop around for the right insurance plan. The logic was that if a person was responsible for a portion of their medical costs upfront, they would put in more effort to find low-cost healthcare providers, thus cutting expenses for the insurer.

What Is a Low-Deductible Health Plan?

With a low-deductible health insurance plan, the policyholder pays lower out-of-pocket expenses when accessing medicare care. The drawback to this type of plan is that insurers usually charge a higher premium. Those who use healthcare services frequently, such as women who are pregnant, people managing chronic illnesses, and those who are older, may benefit from such a plan.

Some people purchase a low-deductible health plan as a “just in case” simply because they are unable to cover the out-of-expenses associated with a high-deductible plan.

Benefits of High-Deductible and Low-Deductible Plans

Pros – High-Deductible Plans

Lower premiums: High-deductible plans typically cost less on a monthly basis than traditional low-deductible plans. People who are looking to save money can benefit from such a plan.

Ability to use a health savings account (HSA): Having a qualified high-deductible health plan means one is eligible to put thousands of pretax dollars into an HSA. This money can be used for medical expenses in the current year or anytime in the future. The money in an HSA can also be invested.

Employer contribution: Over half of the employers who offer high-deductible health plans make contributions to their employees’ HSAs. That’s essentially free money.

Pros – Low-Deductible Plans

Low cost for initial care: Those who are managing a chronic illness or seek frequent healthcare may benefit from a low-deductible plan since they’re likely to only pay a small amount of money out of pocket.

Beneficial to those who cannot afford high deductibles: With a high-deductible plan, when disaster strikes, policyholders will have to shell out a lot of money for healthcare. People who can’t afford to pay too much can benefit from a low-deductible plan.