When I was self-employed, I bought my family’s insurance through the Affordable Care Act’s Health Insurance Marketplace. I didn’t qualify for any subsidies, so I was facing payments of about $1,000 a month.
But when I compared plans, I found one that would drop our costs to just $500 a month. It had a high deductible, but my husband and I were healthy and rarely needed a doctor’s care, so I enrolled us in that plan.
Of course, that’s when I had a medical emergency. I had a huge deductible and had to spend thousands before my insurance covered anything. I quickly exhausted my savings and ended up with medical debt. It was a costly error on my part, but it’s one I’ll never make again.
If you want to cut down your expenses like I did, a high-deductible health plan is much cheaper and might seem like a smart option. But what is a high-deductible health plan? Choosing one can be an expensive mistake if you’re not careful.
How deductibles work
Health insurance is an essential safeguard against medical emergencies — but it’s expensive. According to the Kaiser Family Foundation, the average annual premium for a single person’s health insurance is $6,690.
With any health plan you choose, a deductible will be listed. A deductible is what you have to pay each year toward your medical care before your insurance coverage kicks in.
The monthly premium you pay each month doesn’t count toward your deductible. Only money you pay for medical services, such as visiting a specialist, goes toward the deductible.
If you want a lower monthly payment, plans with a higher deductible are cheaper. Although you’ll pay less each month, you’ll pay more out of your own pocket if you need medical care.
For example, this bronze plan has a $6,650 deductible and a monthly premium of almost $268. If you developed a major medical issue, you’d be responsible for the deductible; if your treatment cost $7,000, you’d pay $6,650 and your insurer would pay just $350.
Health insurance plans with a lower deductible — such as $0 — have a high monthly premium. You’ll pay more each month, but if you need expensive medical care, you’ll pay less out of pocket.
As a contrast to the plan mentioned above, this platinum plan has a $0 deductible and a monthly premium of $818. If the insured person had the same medical treatment that cost $7,000, they wouldn’t pay anything. Instead, the insurer would pay the full amount.
What is a high-deductible health plan?
The term “high-deductible health plan” is often used to described any plan that has a relatively expensive deductible, but it’s more complicated than that. A true high-deductible health plan (HDHP) adheres to established federal guidelines.
As of 2017, the minimum annual deductible for an HDHP is $1,300 for a single person and $2,600 for family coverage. However, HDHP deductibles can be much higher.
Under an HDHP, by law, the insurance company must cover the cost of preventative care — such as an annual exam — before you pay the deductible. But for all other services, such as medical treatments and specialist visits, you’ll cover the cost yourself.
If you’re used to paying just $20 for each doctor appointment, covering the full cost can be a big shock.
What to consider before enrolling in a high-deductible health plan
An HDHP isn’t always a poor choice. For some, it can be a smart way to get insurance without breaking the bank. If you fit the following criteria, an HDHP might be for you:
- You’re young: The older you are, the more likely you are to develop health issues. If you’re in your 20s or early 30s, you’re probably less likely to need regular medical care.
- You’re healthy: If you’re healthy and don’t have ongoing health issues such as diabetes or asthma, you likely only visit a doctor for preventative care and routine visits. In that case, an HDHP could be sufficient.
- You have an emergency fund: If you have an emergency fund and can cover the price of your deductible without going into debt, an HDHP can be a cost-effective choice.
However, choosing an HDHP is still risky. As I found out, young and healthy people don’t always stay that way. If you have an ongoing medical condition, need regular care, or take prescription medicines, an HDHP might not be a good choice.
Also, keep in mind that a lower-deductible plan might be cheaper than you think. If you shop through the Health Insurance Marketplace, you could qualify for health subsidies that help offset your insurance costs. Federal financial assistance is available to those who make 400 percent of the poverty level or less.
To calculate whether an HDHP makes sense for you and to find out if you qualify for financial assistance, you can compare your estimated costs for different plans on Healthcare.gov.
Enrolling in a health insurance plan
Choosing the wrong health insurance can be a costly mistake. But now that you have an understanding of what a high-deductible health plan is and how they work, you can make an informed decision and save money.
For more information on choosing a plan, check out this guide on insurance policies available through Healthcare.gov.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.50% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.53% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|