When choosing the best health insurance for you and your family, you need to deal with various technical terms that confuse you, thus making the process difficult. For example, what do deductibles mean and how do high and low-deductible plans differ from each other?
If you are someone who is unsure about the meanings of such terms then this article is for you. Here we will focus on discussing high-deductible health plans and their various pros and cons, making it easier for you to choose the best plan out there.
What is a High Deductible Health Plan (HDHP)?
In High Deductible Health Plans or HDHPs, the deductible limit is set at a higher amount. It means only when the limit of deductible is exceeded your insurer will settle the claim. This entails the policyholder bearing the healthcare expenses up to the pre-decided deductible limit. The excess amount will be paid by the insurance company.
It is important for you to understand how an HDHP works. So look at the example explained below for a better understanding.
Suppose you have purchased a health insurance policy with Rs. 5 lakhs sum insured and the deductible limit is Rs. 1.5 lakhs. Now, if you raise a claim for 4 lakhs you will have to bear up to Rs. 1.5 lakhs of claim amount and the excess, that is Rs. 2.5 lakhs, will be paid by the insurance company as per the terms and conditions of the policy.
What are the Pros and Cons of High Deductible Health Plans?
There are advantageous and disadvantageous sides to a High Deductible Health Plan. Take a look at the pros and cons to get a clear idea:
Pros
Here are the advantages to consider of high deductible health plans.
- As there is less risk involved for the insurance company it can offer the coverages at a relatively low premium.
- It allows you to choose a higher sum insured and easily meet the costly healthcare costs.
- If you select a higher sum insured you get more inclusive coverage. Therefore, you can enjoy a wide range of coverage at a relatively lower premium rate from companies, like ACKO General Insurance.
- You get tax benefits on premiums with these plans as you will get from most health plans.
Cons
Following are the limitations to consider of high deductible health plans.
- A high deductible means there are chances of incurring higher out-of-pocket expenses.
- You will not be able to trigger the claim if you do not cross the deductible limit under the policy. Therefore, for small claims such plans can prove ineffective.
- These plans can discourage policyholders from reaching for essential treatment as they face high out-of-pocket expenses.
Should You Choose a High Deductible Health Plan?
Depending on your coverage requirements and the affordability of the plan, you have to decide whether to opt for an HDHP or not.
Go for a High Deductible Health Plan if:
- You are healthy and young and the probability of requiring healthcare due to illness is lower.
- You are already a part of an existing health insurance policy, which you have purchased yourself or your employer has provided (group health insurance). In that case, that policy can reimburse smaller claims (up to the deductible limit) and the High Deductible Health Plan will pay for higher claims.
- You are willing to pay the high deductible or the out-of-pocket expenses are affordable to you.
Go for a Low Deductible Health Plan if:
- You anticipate multiple claims due to current illnesses.
- You want to avoid high out-of-pocket costs during the claim settlement process.
- You need short-term coverage for scheduled medical treatments.
- You have either no existing health coverage, or you have one with a limited sum insured.
- In order to ensure coverage with a reduced deductible, you can pay higher premiums.
How Do Deductibles Impact Health Insurance Premiums?
Premiums and deductibles affect each other inversely. It means opting for a higher deductible would require you to pay lower premiums and vice versa. The balance between deductible and premiums distributes the risk between a policyholder and an insurer.
Depending upon your plan members and individual circumstances you should determine what plan to choose.
The Bottom Line
In conclusion, you can take advantage of high deductibles as it prompts insurers to offer discounts and reduce premiums. This plan will also encourage you to avoid making small claims and benefit from a No-Claim Bonus which will also result in a higher sum insured. So, you should consider the pros and cons side by side and make an informed decision.
Meanwhile, if you want to browse excellent health insurance plans (high or low deductibles) you should check out ACKO General Insurance.
