Health insurance can be your lifesaver in critical medical cases. Your financial burden can be considerably reduced when you or a family member is confronted with a serious medical emergency. Yet, there are millions of people who are living without any health cover. One reason for this is that, high premiums and deductibles make people wary of seeking an insurance coverage.
Interestingly, some people avoid this because they simply cannot decipher all the jargon, such as premiums, deductibles, copayment, coinsurance, etc. To add to their misery, people are often exposed to various plans with high or low deductibles, with or without copayments, and so on. Understanding the implications of this is not easy for a common person.
What is a Deductible?
Deductible is basically the part of an insurance claim, which you pay out of your pocket. Although, it is easy to assume that once you are covered under medical insurance, all your expenses will be taken care of by the insurer. Unfortunately, this is not the case, as you need to pay a part of your claim even before the insurance company makes its first payment. This amount is fixed on a yearly basis; it can start from a few hundred dollars and go up to a few thousand dollars. The insurer becomes liable to pay your claim only after you meet your deductible.
An insurance company makes money through the premiums that you pay. Its expenses include your claim amount and processing charges (which are more or less the same for a minor claim, as well as a large medical bill). The deductible is a means to ensure that they are not required to process several minor claims. This way, only serious claims come for processing, which results in cost reduction.
Choosing a Plan
Opting for a low deductible plan may seem like a natural choice for you. However, you need to think carefully, because this option involves certain pitfalls. It certainly ensures that you quickly meet your part of the payment so that the insurance company pays for the rest of the amount.
On a flip side, opting for such a plan makes you liable to pay a higher premium, as this is the only way an insurance company can offset your deductible amount. On the other hand, high deductible plans often require you to pay a lot less in terms of premium. However, here the risk is that if you are a healthy individual, you may never be able to spend your full deductible amount in one year.
Although, some companies allow you to carry forward the deductible to the next year, you can never be sure. A safe option would be to choose a deductible plan that you can afford. This way, you can reduce the premium amount, while still get covered for most of the major expenses. However, even this plan is not foolproof.
Types of Plans
Health Management Organization (HMO), Preferred Provider Organization (PPO), and indemnity plan are primarily the affordable health insurance plans which offer a low deductible option under US federal law. HMO plans may have very low or even zero deductibles, but then you may have to pay towards copayments or coinsurance, which are the other out-of-pocket expenses.
With PPO, you can avail a low deductible plan only on certain medical expenses, and that too, if you seek medical services from select medical centers included in their network. If you visit an out-of-network health care provider, you will be liable for deductibles and other out-of-pocket expenses. Lastly, an indemnity plan provides you with the liberty of choosing your health care provider and covers most of the medical expenses, but then you will have to pay an additional coinsurance after your deductible is met.
One can truly get confused with all the plans available in the market. Hence, it is important to assess your financial position and possible health care services that you are likely to require, before choosing a cover.