Health insurance premiums are recurring expenses that have to be met consistently and on time in order to ensure proper coverage for medical expenses. In tough times like the recent recession, such recurring expenses can put a huge strain on finances causing many people to default on payments and leave themselves exposed to further financial burden when medical emergencies occur.
Businesses and individuals can reduce the recurring cost of premiums by opting for health insurance deductible plans. Under these schemes, the insured person has to pay a certain amount as deductible before the insurer starts making payment towards the medical expenses. If and insured person runs up a medical bill of $5,000 for hospitalization in a year, his insurer will start covering the costs incurred beyond the initial deductible.
If the person has a deductible of $500 as per the terms of his plan, he will have to shoulder his expenses to this amount after which the balance $4,500 will be met by the insurer.
The benefit for the insured is that when he opts for a higher deductible, he gets to benefit from lower premiums. The insurer calculates the deductible in conjunction with the premium payable. For the insurer, the advantage of higher deductibles is that the company can offset some of the medical expenses to the beneficiary. Typically, a deductible is applicable for each year. In our example, the insured person will pay up to $500 a year in medical expenses.
The insurance plan may also come with a deductible and co-pay. The co-pay is a fixed amount which the insured has to pay per bill raised on him beyond which the insurance will be applicable. If an insured person has a co-pay of $30, he will have to meet the first $500 of his yearly medical expenses himself and, in addition, pay $30$ per bill he sends in for claim.
Some plans come with co-insurance, which means that for every bill claimed, the insured pays a proportion of the bill on his own with the insuring company paying the rest. The proportion is agreed upon when the insurance policy is taken up, for instance 80% payable by the insurance company and 20% payable by the insured.
It pays to remember that deductibles may vary depending on the type of medical care required. Hospital stays may draw bigger deductibles while out patient treatments are relatively cheaper. Assessing your average medical expenses and setting a sensible deductible amount can help reduce your premium burden.