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Explained: Health Insurance Deductible

Health insurance plans have changed in America over the last few decades. When insurance first became available there were no co payments for prescription drugs and doctor visits. There were no benefits for preventive care services through your insurance plan. Those plans primarily focused on major medical surgery and emergency room situations. Every medical expense was subject to a deductible before the insurance would pay anything. The deductibles were lower than they are today. But a $50-$100 dollar deductible wasn't cheap when it was normal. The reason for the deductible is to lower the monthly costs. The higher the deductible, the lower the monthly cost because the insurance company would be less likely to incur a cost the higher the deductible goes.

This is a major consideration in the price of your insurance each month. If you think you are paying too much for insurance, many Americans will choose a higher deductible. These days a deductible of 1000 or 2500 is not unusual. While that is a lot to pay out of pocket in the event of an illness, nobody is required to pay it if they do not get sick or injured. It is not unusual for someone to have a plan for ten or twenty years without paying anything toward a deductible if they are healthy and do not use medical services. Doctors visits for sickness and wellness check-ups that people might use once or twice a year might be a few hundred dollars out of your pocket. But the savings in monthly premiums could more than make up for that amount each year.

This is where they came up with the concept of Health Savings Accounts (HSA). Health savings accounts couple a high deductible health plan (HDHP) with a tax free savings account to try to keep costs under control. These plans are also known as consumer driven health care plans. The reason for this is that the consumer is more likely to reconsider the doctor visit or expensive and questionable test if they have to pay for it out of their pocket rather than paying a single co payment for everything they do. Most HSA's come with plans with a 2500 or 5000 deductible. The insurance will not pay anything until that deductible is met except for a free annual physical each year. These plans offer more savings if you put the money to pay for the deductible in a savings account that acts much like an IRA. Individuals and families can take the money they put into the savings account off of their taxes. This way if they need to satisfy the deductible for a medical claim, they have the money in a savings account. The high deductible causes lower premiums for the insurance. So if they don't use the medical insurance they get to keep the money. Consider higher deductibles to lower your medical insurance costs.



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Tag : Health
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