Low-Deductible Health Insurance Plans


Health insurance includes traditional health insurance called indemnity plans and managed care plans, known as PPOs, HMOs and POS plans. Indemnity plans have a deductible, co-insurance and a maximum out-of-pocket amount. The managed-care plans may have a deductible on hospital visits, but normally they use co-payments instead. When you consider an indemnity plan, you need to look at the benefits and costs of using one with a lower deductible.

A Deductible

  • The deductible is the amount you pay for medical treatment before the insurance company pays any portion of your claim. The companies normally base the deductible on a calendar year. Some policies offer a carryover provision where the amount you paid in the last three months of the policy apply toward the following year's deductible. The higher your deductible, the higher the amount is that you pay out of your pocket. Many times healthy people don't spend enough to pass the deductible amount for the year.

    Most family policies have a limit on the number of deductibles per family each year. If you have five covered family members and the ceiling is two, once two members meet their deductibles, it is as though all family members have.


  • The function of the deductible is to save the insurance company money on smaller claims. The smaller claims are more frequent, and the processing costs as much as large claims. As an incentive to select the higher deductible, the insurance company lowers the premium for a higher-deductible policy.


  • Just because you have a lower deductible, it doesn't mean that you'll have everything paid for once you meet the deductible. Most traditional policies have co-insurance. Co-insurance is a percentage that you pay after the deductible. It normally looks like 80/20 or 70/30. Eighty/20 means that the insurance company pays 80 percent of the claims and you pay 20 percent to a specific amount called out-of-pocket maximum.

Out-of-Pocket Maximum

  • The out-of-pocket maximum amount is the most you or your family pays for health care before the insurance company pays for everything. It is a combination of the deductible and the co-insurance amount. There normally are two maximums for the policy. One maximum is the individual amount per person and the other is per family.


  • If you seldom meet your deductible or don't even come close, you might consider an alternative plan. A health savings account combined with a high-deductible policy is a great alternative for healthy people. The money in the savings account covers the cost of the bills until you meet the deductible. If you don't use all the money in the account, it rolls over for the following year and years to come since it is your money to keep. It gains interest and grows tax free with tax-free withdrawals for legitimate medical use, including dental.


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