3 Little-Known Perks of a High Health Insurance Deductible

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KEY POINTS

  • Some health insurance plans require enrollees to pay a higher deductible.
  • While shelling out that money may not be fun, you might benefit in other ways.
  • You may have the opportunity to enroll in an HSA, and your employer may contribute to it as well.

Don't assume a high deductible is a bad thing.

When it comes to signing up for health insurance, you have choices. And if you work for a company that offers a subsidized health plan (which many do), you may be offered the option to select a high-deductible insurance plan.

Your deductible is the sum of money you need to shell out before your insurance company starts to cover your healthcare services. If you have a $1,000 deductible to meet and see a doctor who charges you $800 for a procedure, you'll have to pay that sum out of pocket due to not having yet met your deductible.

Some health plans have a higher deductible than others, and at first, those might seem like a poor choice. After all, why would you want to have to shell out more money before your insurer starts picking up the tab for your care?

But while high-deductible health insurance plans aren't perfect, they actually do have their benefits. Here are a few you might appreciate.

1. Lower premiums

Health insurance premiums and deductibles tend to have an inverse relationship -- the higher one is, the less you'll spend on the other. If your health insurance plan has a high deductible, it may be that your monthly premiums are lower. The result? A higher paycheck (assuming your premiums are deducted from your pay, which is generally the case when you have health insurance through your employer).

2. The option to participate in an HSA

HSAs, or health savings accounts, let you set aside pre-tax dollars for near term and future medical expenses. Unlike flexible spending accounts, HSAs do not require you to spend down your account balance every year.

In fact, HSAs allow you to invest funds you don't need right away so they can grow into a larger sum over time. And HSA withdrawals taken for medical bills are yours to enjoy tax-free.

But not everyone gets to participate in an HSA. To qualify, your health plan has to have a high enough deductible.

The IRS sets that number every year. This year, you need an individual deductible of $1,400 or a family deductible of $2,800 to fund an HSA. But doing so shields some of your income from taxes, so contributing to an HSA is a solid move if your health plan is compatible.

3. Employer HSA contributions

Just as some companies give workers money in their 401(k)s, so too do they make HSA contributions on workers' behalf. And free money is never a bad thing.

At first, you may be inclined to think that a high-deductible health insurance plan is bad news. But actually, there are a number of hidden perks you might enjoy if you sign up for one.

That said, if you have a health insurance plan with a high deductible, make sure to keep enough money in your savings account to cover it each year. You don't want to land in a situation where you wind up racking up debt due to not being able to pay your deductible.

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