How to understand deductibles and their impact on premiums
Who is this for?
This information will help you if you're shopping for health insurance and have questions about how it works and how your money is spent.
When deciding which health insurance plan works best for your budget, it’s important to understand how your deductible can affect your premium.
- Your premium is the monthly amount you pay to your health insurance company to maintain your health care coverage. You may have to pay the total cost of your premium, or you might share the cost with your employer or union.
- A deductible is the amount you pay for health care services before your health insurance begins to pay.
For example, if your plan deductible is $1,500, you would pay 100 percent of your health care charges out of pocket until the amount you paid reached $1,500. After that, your insurance company will pay a percentage of the charges based on the details of your plan.
How do they work together?
If you choose an insurance plan with a high deductible amount, you will most likely have a lower monthly premium. If your plan has a high monthly premium, the deductible amount will be lower.
Should you choose a lower monthly premium or a lower deductible? It depends on how you use your health insurance.
If you don’t use your health insurance much and want to keep your monthly costs low, picking a bronze plan might save you money.
But if you use your health coverage often, you may come out ahead if you pay a little more each month for your premium in order to get a lower deductible. With a lower deductible amount, you’ll pay less out of pocket before your insurance starts paying a percentage of the costs. In this case, you may want to choose a silver, gold or platinum plan.