High Deductibles, Low Premiums Fine for Some People, a Problem for Others

By Deborah Hirsch
TMCnet Contributor

With the high cost of health insurance, many are opting for higher deductibles and lower premiums. But that can backfire if unexpected illnesses or injuries occur. 

The number of people who are choosing to do this is increasing by leaps and bounds. According to Fidelity Investments, McKinsey & Co. reported that 18 million Americans bought high-deductible plans in 2010, compared with 13 million two years ago).

People pay higher deductibles, sometimes as much as $5,000 as in my case, for a pre-existing condition, in exchange for lower premiums. For some people, this makes sense. But for others, it can mean paying for all your health care up to $5,000 – and still paying for a premium that covers nothing. 

A recent RAND Corp. study disagrees, however. In fact, the study found exactly the opposite . Of the 360,000 families surveyed from 2003 to 2007, all either low-income or with pre-existing conditions, most choosing these plans wound up being no less likely to cut back on needed health care than those without high deductibles.

And in addition, the study found, surprisingly, that people on high-deductible plans paid substantially less in health care than others who chose traditional plans.

But some, like me, with high deductibles have experienced unpleasant surprises. A simple x-ray can run over $600, something I never thought about when I had a lower deductible and my insurance covered it. And yes, this may mean lower healthcare costs over the long run because people will think twice, do I really need this, rather than just going to the emergency room automatically because insurance foots the bill.

High-deductible health plans are essentially a gamble. You risk that you won’t need unexpected coverage for anything, and they guess that you will. Guess who usually wins? Insurance policies can charge the lower monthly premiums because the patient is covering the first $1,000 to $5,000 out of pocket, before the insurance kicks in, according to improvehealthcare.org.  

Where the plans are most valuable is when someone has a serious illness or injuries that require a long hospital stay, according to a story in the New York Times. This is called catastrophic health insurance.

Nonetheless, high deductible plans are growing in popularity, and are held by about 10 million people in the U.S., according to the Los Angeles Times.

For people who are healthy, with some financial means, they’re a good fit because they’re not likely to need many doctors’ appointments or screenings, so foregoing these kinds of medical services are a no-brainer.   USA Today reports that most using these plans have a median annual income of $75,000, but it’s highly likely that low-income people use these plans to a large extent, too.

The lower premiums do help more people insure themselves against catastrophic illnesses or injuries. But you’d be surprised how often you need a doctor for a sprained ankle or migraine headache or for something you didn’t plan for, during the year.  And yes, I’ve switched to generic drugs!