First, what is a deductible in California health plans?
The amount you must pay for medical services
each year before your insurance begins paying.
The plan deductible is an amount you will pay first before you get help from the carrier. Keep in mind that with a PPO plan, you will get discounted PPO rates which can lower the costs by 30%-60% even though you have a deductible to meet. It's very important to always stay in-network to keep your costs down.
Before medical inflation expanded so quickly, we had many no-deductible PPO plans with very rich benefits...even on the individual California health insurance market.
Those plans slowly disappeared from the market as rate increases occurred every 6-12 months at double digit rates. With this medical inflation, deductibles became more common and they continue to grow in amount over the past ten years. $1000 was once thought of as being a higher deductible plan.
This is not the case any more.
On average, with individual California health insurance plans, the range of deductible ranges from $500-$5000. Higher deductible plans are usually thought of as $1500 or $2000 plus.
The Small Group market is different in that benefits tend to be richer but premiums are more expensive. Since employers are paying part of the premium (if not all), the deductibles tends to be lower. This usually doesn't make sense in the individual market since a person is essentially paying the premium for his/her own coverage. The premium savings of going to a higher deductible must be taken into account.
This does not factor into Group health insurance.
This is primarily driven by age and secondarily by area.
Age is the biggest driver of health insurance costs for California individuals or Small Groups. An estimate showed that medical costs double with each decade of a person's life on average. As you get older, the annual premium difference between a high deductible and richer plan grows.
At a certain age, the premium savings may pay for all of your deductible (or most of it) whether you use the plan or not.
Let's say you are comparing a $500 deductible and a $3000 deductible PPO plan.
IF the premium difference in a year's time is $2000, then it might be a good move. If you have a good to average year for medical costs, you pocket the savings. In fact, until you have $2500 in services, it still makes sense since your saving $2000 and the richer plan has a deductible of $500 anyway.
A few points.
High deductible plans (especially HSA plans which we'll discuss later) may apply office visits and/or prescription benefits towards the main deductible. If you had many office visits or more expensive prescriptions, this might impact you differently since some richer plans will allow copays for these services more quickly (not subject to the main deductible). There are so many different combinations of plan benefits on the market now that it's important to go through a licensed California health insurance agent like Goodacre Insurance Services to make sure you find the right fit.
There are almost too many options on the market and it can be overwhelming. We can quickly size up whether there's enough savings in going with a high deductible health plan for your situation.
HSA's or Health Savings Accounts are very popular plans these days and they derive their benefit from the premium savings mentioned above in conjunction with a tax benefit to fund smaller medical bills up to the deductible.
Certain high deductible plans are deemed HSA Compatible which means that you may be able to fund pre-tax money into a separate tax-favored account.
You can then use these funds to pay out-of-pocket eligible medical and dental expense since you have a high deductible plan. One big difference is that the deductible is cumulative or a family deduction if you have 2 or more family members on one policy.
You are essentially all working towards one
deductible where most other health insurance
plans apply a deductible for each family
member...usually up to a two-member-maximum.
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