What’s the Difference Between High Deductible and Low Deductible Plans?

Posted: April 17, 2024

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When signing up for a health insurance plan, you need to consider various out-of-pocket costs. Your deductible will typically be the most expensive cost, so it’s important to understand the difference between a low deductible health plan (LDHP) and a high deductible health plan (HDHP). The deductible that’s right for you will primarily depend on your health and financial situation.

What Is a Deductible?

Your health insurance deductible is the money you must pay for medical services before your insurance provider steps in. For example, if you have a $1,000 deductible, you will pay the first $1,000 of your medical bills out of pocket. After you pay the deductible, you will only have to pay a copayment fee on covered services while the insurance company covers the remaining amount.

Before choosing a health insurance plan, you must know all the potential costs involved. Discover what common health insurance terms mean below so you can make a more informed decision:

Deductible: Your deductible is the out-of-pocket amount you pay upfront for services before your insurance pays.
Coinsurance: After you pay your deductible, your insurance will start paying a greater amount toward your needed services. This is known as coinsurance.
Copay: Your policy terms will list a copay, which is a fixed cost you must pay on your medical expenses.
Premium: Your premium is the monthly amount you must pay on your insurance policy even when you don’t need or use it.
Out-of-pocket maximum: The out-of-pocket maximum is the highest amount you must spend on your medical care per year. Once you reach your out-of-pocket maximum limit, your insurance company will pay 100% of your in-network services. If you remain in-network, this amount doesn’t include your premium.

What Does It Mean if Your Deductible Is High?

High deductible plans require you to pay higher upfront costs before your insurance starts to cover a portion of medical services, but your monthly premium will be lower. In comparison, you’ll pay less money upfront with a low deductible plan, but you’ll pay a higher monthly premium.

Essentially, the less you pay monthly, the more you’ll have to pay out-of-pocket on medical expenses. However, insurance companies will cover 100% of costs up to an allowable amount after you reach the maximum out-of-pocket limit. Individual and family plan deductibles cannot exceed a set amount unless you need out-of-network services they may not fully cover.

Pros and Cons of High Deductible Health Plans

Before you sign up for an HDHP, it’s helpful to understand both the pros and cons. Some of the pros of an HDHP are:

Lower premium: You’ll pay higher upfront costs for services, but you’ll also have lower monthly bills.
Health savings account: Some HDHPs offer a health savings account (HSA) to help you cover out-of-pocket costs.
Free preventive care: Your HDHP may cover preventive health services at little to no cost.
Employer contributions: Many employers who offer HDHPs contribute to their employees’ HSAs, which helps you pay for health care costs.

The cons of an HDHP are:

High health care costs: The main downside to an HDHP is that it could cause you to pay high costs for care. Whether you manage a chronic illness or get an unexpected injury, you will have to pay significantly if you frequently visit the doctor or hospital or require serious procedures.
High deductible: An HDHP will have a higher deductible. This means you will have to pay a larger amount of your medical expenses before your insurance starts to pay a portion.

Pros and Cons of Low Deductible Health Plans

If you can afford a high premium, LDHPs are a great option. The main pros are:

Lower deductible: LDHPs require you to pay less money upfront if you need medical care. This means you’ll receive extensive care and medical services with low upfront costs.
Low health care costs: If you become injured, require surgery or develop a serious illness, an LDHP can help you diagnose and manage your condition easily without paying high out-of-pocket costs.

The cons of an LDHP include:

Higher premiums: You’ll pay more money monthly for an LDHP, meaning your yearly insurance expense is greater than with an HDHP.
Greater risk: The biggest downside of LDHPs is that you can risk paying high monthly premiums for nothing if you don’t need extensive care. Additionally, you risk losing your insurance plan if you are unable to pay your monthly premium. You may find it safer to choose a low-premium HDHP if you’re not sure you’ll be able to afford a high monthly premium.

Is It Better to Have a Higher or Lower Deductible?

Your health situation will ultimately determine which deductible is best for you. If you’re healthy and young, an HDHP may be best because you will likely only require preventive care and little to no medical services per year. However, you may benefit more and save more money with a low deductible plan if you fall into any of the following categories:

Pregnant individuals or people planning to have a baby in the near future
Older adults
Athletes who play high-risk sports
Individuals with serious illnesses or conditions requiring expensive prescriptions or procedures

When choosing a deductible, you should also look at your financial situation. Consider your budget, savings and how easily you could meet a high deductible if needed. Additionally, consider how much money you could contribute to an HSA each year if you had an HDHP with this added benefit. If you are looking at a low deductible plan, determine how much money you can afford to pay on a monthly premium.

What’s a Good Deductible for Health Insurance?

The best deductible is no deductible, but these plans are expensive and not accessible or suitable for everyone. If you are looking at plans with a deductible, knowing the average deductible in your state can help you compare your plan. Note that deductibles vary by state.

The average annual deductible in the United States is $1,735 for employer-sponsored health insurance and $2,825 for plans on health insurance marketplaces. In California, medical deductibles range from $0 to $7,000 for individuals and as high as $13,000 for families.

Deductibles in California Health Insurance

Whether you are looking for a high or low deductible, California has health plans to meet your needs. A traditional health insurance plan has higher premiums and lower deductibles, while an HDHP has lower premiums and higher deductibles. You can access health insurance through your employer, private health insurance companies or government health care. Before signing up for health insurance, consider the following plans and deductibles:

Platinum: The platinum plan has no deductible and the highest monthly premium. It pays 90% of your medical costs.
Gold: The gold plan has no deductible and a high monthly premium. It pays 80% of your medical costs.
Silver: The silver plan has a moderate deductible and a moderate premium. It pays 70% of your medical costs.
Bronze: The bronze plan has the highest deductible and the lowest monthly premium. It pays 60% of your medical costs.
Minimum coverage: The minimum coverage or catastrophic plan is only available for individuals experiencing financial hardship or under 30 years old. These plans have the highest deductibles and out-of-pocket maximums and pay less than 60% of your medical costs.

Find a Health Insurance Plan With Health for California

All Californian citizens must have health insurance, and the insurance agents at Health for California are happy to help you find the best plan for your needs, free of charge. We have multiple plans for you to choose from, including individual, family, small business, senior, travel, newborn insurance and more.

Our online application process is fast and easy, and we’ll get you the most affordable prices from multiple providers. Plus, we’ll help you determine if you qualify for government subsidies or cost-sharing and prevent penalties.

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