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Low-deductible health insurance is a insurance plan that offers the consumer lower out-of-pocket costs when compared to other plans. The deductible is an amount of money that must be paid by the consumer for health care per year before the insurance plan will start to cover any medical bills. Many types of insurance may offer a low-deductible health coverage option. In return for lower medical costs, the consumer will generally have to pay higher monthly premiums with this type of plan.
In the U.S., health insurance policies usually contain deductibles, i.e., the predetermined amount of money the consumer must spend on health care costs each year before the insurance company starts to pay its share. A type of insurance in the Health Management Organization (HMO) system, for example, may have deductibles as low as zero. Other plans have deductibles that range from hundreds of dollars to thousands.
An insurance plan under the Preferred Provider Organization (PPO) umbrella is also considered low-deductible health insurance. With a PPO plan, deductibles are usually relatively low and may only apply to specific services such as hospitalization, as long as preferred health care providers from a list, or network, are used. The consumer may also visit health care providers outside the network; in those instances, deductibles will often apply along with other out-of-pocket costs once the deductible is met.
Another type of low-deductible health insurance is called an indemnity plan. With this type of insurance plan, the deductible applies to all medical costs; the consumer may also have to pay co-insurance which is a percentage of medical costs after the deductible has been met. Insurance companies that offer indemnity plans often have varying levels of coverage to choose from, with deductibles that are low when compared to other plans. Some have lower deductibles and higher co-insurance costs and others may have higher deductibles coupled with lower co-insurance. This allows the consumer to select a level of cost he or she is comfortable with.
The attractive feature of a low-deductible health insurance plan is the promise of lower costs. Out-of-pocket expenses for health care are usually low and deductibles are often met quickly. The trade off is usually a higher monthly premium payment. Low-deductible health insurance generally costs much more to purchase compared to plans with higher deductibles. Some healthy consumers may not even reach the deductible and could end up paying extra for services they never use, so they should carefully consider their needs before choosing particular plan.