By Christopher Wolfington
Now that many of the 2018 Affordable Care Act health insurance plans won’t cover primary health care costs before meeting the deductible, the age-old question is even more important now than ever: should you choose a high-deductible or a low-deductible health insurance plan?
Ultimately, cost is king, and many are simply unable to afford the higher premiums of low-deductible health insurance plans, while others can afford a higher premium but can’t afford the medical costs involved with a low-deductible plan. In those situations, there aren’t any options. Beyond that, each plan is different, and depending on availability one may be obviously better than another.
But many individuals and families do have options, and for those people, here are three things to consider in deciding between a high-deductible and low-deductible plan.
History of Health
Not everyone is equally healthy. Some individuals rarely get sick, and others get sick often. Beyond that, some individuals have genetic predisposition towards disease and others don’t.
If you are a long history of good health, high-deductible plans might just be more likely to save you more money over the long run, all things being equal. Still, consider other factors like age, location, and profession in evaluating your health.
Risk of Injury
Choose a low-deductible plan if you or your family members have any increased risk of injury. Injuries are expensive, and meeting the deductible quicker allows you to get more value out of your health insurance policy.
Many factors beyond dangerous jobs can contribute to a risk of injury. Playing sports or participating in other strenuous athletic activities could lead to injury. And any profession that involves operating either simple vehicles or complicated machinery will have a higher likelihood of injury, too.
Health Savings Account
Contributing to Health Savings Accounts presents a number of key benefits. You can divert money to HSAs pre-tax out of your paycheck, and some employers may also contribute to them. Money in HSAs earn interest and can be diverted to mutual funds or stocks.
However, money in an HSA must be used towards qualifying medical expenses, and are only available for high-deductible plans that meet a few requirements from the IRA. Due to the tax-advantaged nature of the HSA, you can end up saving money on health expenses. But it isn’t for everybody, and they are unavailable for a low-deductible plan.