The upside to having a high deductible is that
A your monthly premium (payment) will be higher.
B your monthly premium (payment) will be lower.
C your portion of what you pay is higher than a lower deductible.
D your portion is the same as if you had a lower deductible.
The Correct Answer and Explanation is :
The correct answer is B: your monthly premium (payment) will be lower.
Explanation:
A high deductible health plan (HDHP) typically involves a higher deductible—the amount you pay out-of-pocket for health care services before your insurance begins to pay. However, the benefit of a high deductible is that it often results in lower monthly premiums compared to plans with lower deductibles. Here’s a breakdown of the key factors:
- Lower Monthly Premiums:
When you choose a high deductible plan, you are agreeing to pay a larger amount upfront (the deductible) before the insurance company starts contributing to your medical bills. In return, the insurance company lowers your monthly premium. This is advantageous for individuals who do not expect to need frequent medical care, as they can save money on their premium each month while taking on more risk in case of unexpected health issues. - Higher Out-of-Pocket Costs When You Need Care:
The trade-off for lower monthly premiums is that, if you need medical services, you will have to pay more out-of-pocket to meet the higher deductible. Once you meet the deductible, your insurance will begin to cover a larger portion of your costs, but the initial burden of those costs is on you. - Cost Considerations:
A high deductible plan may be beneficial for individuals who are generally healthy, rarely require medical attention, and have the financial ability to cover the deductible if needed. However, for those with ongoing health conditions or frequent doctor visits, the higher deductible could result in higher total out-of-pocket expenses despite lower monthly premiums.
In contrast, plans with lower deductibles usually come with higher monthly premiums because the insurer is taking on more risk by covering more of your costs upfront.