Low-deductible health plan basics
Low-deductible health insurance plans carry a lower deductible, meaning that when you get sick, you pay less money upfront before your plan starts paying. The trade-off is that you'll pay more for your monthly premium when you have low-deductible coverage.
An obvious downside to these plans is that if you don't end up needing more extensive medical care, you'll have paid a higher monthly premium for nothing. The silver lining, however, is that low-deductible plans make managing and predicting health care expenses easier if you develop a serious illness, are injured or need surgery. There's no large out-of-pocket expense to worry about since the deductible is lower.
Even so, sacrificing a lower monthly premium to get a lower deductible also means giving up something else: a health savings account.
High or low? Which is right for me?
The simplest way to decide whether a high or low deductible plan makes more sense is to consider your health situation.
If you're young and healthy, you may be less likely to need anything more than preventive care, in which case a high-deductible plan could be the better fit. On the other hand, a lower deductible may be more appealing if you're older, have a chronic health condition, participate in high-risk sports or activities, are pregnant or plan to have a child at some point, or you require pricey prescriptions for a health issue.
It also helps to assess your savings and budget. Consider how easily you'd be able to meet a higher deductible if necessary. And if you have access to an HSA with a high-deductible plan, ask yourself how much you'd be able to contribute each year. (Note: Similar to other tax-advantaged accounts, HSAs have annual contribution limits: for 2021, $3,600 for individuals with self-only coverage [up from $3,550 in 2020] and $7,200 for those with family coverage [up from $6,900 this year].)
With a low-deductible plan, think about how much you can afford to pay for the monthly premium. Weigh that against the value of being able to have health care services covered when you need them without having to hand over a significant amount for the deductible.