Should I get a Medicare Plan with a Low Premium and High Deductible?

Steven Mott by Steven Mott | Licensed since 2012
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This article was updated on: 10/06/2018

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Various Medicare options, including Medicare Advantage, Medicare Part D, and Medicare Supplement are offered by private insurance companies contracted with Medicare. These companies are free to set varying rates for the plans they offer within Medicare-defined limits. If you’re researching Medicare plans, you probably want the best coverage for the lowest price. Determining which plan is the lowest price requires understanding the different ways the plan will cost you, including the insurance premiums and health insurance deductible.

What is a health insurance premium?

A health insurance premium is your monthly cost for health insurance, regardless if you use medical services or not. Some Medicare Advantage plans may have monthly premiums as low as $0. . Learn more about how a Medicare Advantage plan can have a zero dollar premium. Keep mind that a $0-plan premium does not mean zero costs. You must continue to pay your Medicare Part B premium.

What is a health insurance deductible?

A health insurance deductible is the amount you pay for covered health care services before your plan begins to pay. Deductibles can range from $0 to thousands of dollars, depending on the policy. For example, if you incur $1,500 of health care charges and your deductible is $2,000, you may pay everything and the plan may pay nothing. If you incur $3,000 of charges and your health insurance deductible is $2,240, the plan may pay only $760 and you pay $2,240.

How could a low premium and a high deductible save me?

You may pay all your health care costs out-of-pocket until you reach your deductible. However, generally after you meet your deductible, you will still have to pay a coinsurance or copayment until you reach your out-of-pocket maximum. Learn more about Medicare copayments and coinsurance.

In the example below, a health insurance plan with a low premium and a high deductible could save you if you don’t have many health care costs. If your yearly health care costs were $580 and you don’t have any other costs, such as coinsurance or copayments, this is what your out-of-pocket spending could be:

Plan Monthly Premium Deductible Copayments and coinsurance Costs Incurred based on medical services you receive Your possible total yearly out-of-pocket spending with this plan
X $0 $2,240 $0 $580 $580
Y $100 $0 $0 $580 $1,200

However, if you have a lot of health care costs, you could save more with a higher monthly premium and a lower deductible. If your yearly health care costs were $4,600, this is what your out-of-pocket spending could be:

Plan Monthly Premium Deductible Copayments and coinsurance Costs Incurred based on medical services you receive Your possible total yearly out-of-pocket spending with this plan
X $0 $2,240 $0 $4,600 $2,240
Y $100 $0 $0 $4,600 $1,200

Do you have more questions about Medicare plan premiums and deductibles?

I am happy to give you more information and answer your questions. If you prefer, you can schedule a phone call or request an email by clicking on the buttons below. You can also find out about Medicare plan options in your area by clicking the Compare Plans button.

Benefits, premiums and/or copayments/co-insurance] may change on January 1 of each year.

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