Why Should I Consider a High Deductible Health Plan?

There are a few reasons to consider a high deductible health plan, though the most important reason is that with a higher deductible comes a lower monthly premium. This could save you a great deal of money over the course of the year, provided you are in good health and that nothing major happens, or that you can afford to cover the deductible without hardship if something does happen. Many people combine a high deductible health plan with a health savings account, frequently abbreviated as HSA, in order to put aside money tax-free to be used for medical expenses, which is another reason to consider a health plan with a higher deductible.

The deductible on a health insurance plan is the amount of money that must be paid out of pocket before the insurance begins to cover the expenses; health plans with very low deductibles tend to have higher monthly premiums. For people with medical conditions that require frequent doctor's visits or high prescription costs, this can make sense. People who are generally healthy, however, and only go to the doctor once or twice per year for a regular check-up, often choose a high deductible health plan so they pay more out of pocket when they go to the doctor, but less on their monthly premiums.

Even a high deductible health plan is available in various ranges, so you can choose the deductible amount that is most realistic for you. It is best to imagine the worst case scenario in which you might actually have to come up with the entire deductible all at once. Would you be able to do it? If you have that amount set aside in a savings account, it can help you to feel more at ease with selecting a high deductible health plan. Not all high deductible health plans come with a corresponding HSA account; you might want to look for one that does, or you can set one up on your own at a bank.

A health savings account is an excellent accompaniment to a high deductible health plan. It allows you to set money aside each month to be used for medical expenses; typically, the money remains entirely tax-free. This means that when you place your income into an HSA, you typically do not have to pay income tax on it, and as long as you use it for qualified medical expenses, you will not be charged tax on withdrawals either. HSAs will generally also offer incentives to continue putting money in; some companies will match contributions if you buy it through your workplace, while others will simply earn interest on the funds in the account, which may also be tax-free.