Health insurance is a crucial thing to have for everyone. Medical problems can pop up at any time, and if you are not prepared financially, health insurance is there to save you from a devastating impact on your bank account.
Health insurance policies are considered cost-sharing agreements. Cost-sharing means you help pay for some of the costs associated with the claims, other than your monthly premium. Some cost-sharing elements of a health insurance policy include copays, coinsurance, and a deductible. Usually, the higher the deductible you have, the cheaper the premium.
- What is a Health Insurance Deductible?
- What is No-deductible Health Insurance?
- How Does No-deductible Health Insurance Work?
- What Does No-deductible Health Insurance Plans Cover?
- Cost of No-deductible Health Insurance Plans
- Advantages of No-deductible Health Insurance Plans
- Disadvantages of No-deductible Health Insurance Plans
- Can You Get Short-term Health Insurance Without a Deductible?
- What to Consider When Purchasing a No-deductible Health Insurance Plan
- Who Should Consider a No-deductible Health Insurance Plan?
- Alternatives to No-deductible Health Insurance
What is a Health Insurance Deductible?
Many health insurance policies have a deductible, which is an amount you pay out-of-pocket for medical services before the insurance company covers additional costs. For example, a policy may require you to pay $2,000 out-of-pocket before they cover 100% of the remaining costs for the rest of the year.
However, note that even after the deductible is met, you could still have coinsurance and copays depending on your plan, such as the company only covering 80% of the costs after deductible, leaving you responsible for the remaining 20%. Additionally, some health insurance policies don’t have a deductible and are known as no-deductible health insurance.
What is No-deductible Health Insurance?
As the name suggests, a no-deductible health insurance policy means the deductible is $0, and benefits will kick in immediately. You likely will still have coinsurance and copays where applicable. To determine if this plan is for you, you should calculate the out-of-pocket costs you might have with a no-deductible versus deductible plan.
If you expect that you will have some significant medical expenses coming up, like surgery or long-term treatment, keep in mind that because there is no deductible, the monthly premium for the plan will be higher than a standard policy. A no-deductible plan can be purchased through the Health Insurance Marketplace and possibly your employer if they offer it.
How Does No-deductible Health Insurance Work?
When you have a standard health insurance policy with a deductible, the insurance company begins to pay benefits once you have met your deductible. A no-deductible health insurance policy is the opposite. Since you have no deductible to pay, they will begin covering your benefits immediately.
Almost everything else about the plan will be similar to a standard deductible health insurance policy. You may still have some other cost-sharing contributions to make in the form of copayments or coinsurance, depending on the structure of your policy. Your health insurance plan will also have specified benefits and exclusions, so it is essential that you still read your policy to know what is covered.
For example, if you have a no-deductible health plan and a surgery benefit, your insurance plan would kick in immediately. Your hospital bills, medicine, and recovery fees could all be covered. Remember, you may have coinsurance which commonly is 20%, so you will still have some out-of-pocket costs.
Like a standard policy with a deductible, you could have an out-of-pocket max. Depending on the medical treatments you need, your out-of-pocket max could be reached quickly between your coinsurance and copayments. After that, the insurance company will pay the rest for the policy period.
What Does No-deductible Health Insurance Plans Cover?
A no-deductible health insurance plan will cover and exclude similar benefits as a plan with a deductible but can vary from one insurance company to another. However, most plans will provide some coverage for the following:
- Chronic Disease – Many Americans suffer from a chronic disease of some type. Whether this is diabetes, cancer, or a heart condition, it can mean ongoing medical expenses that can be financially taxing. Many no-deductible health insurance plans will provide some coverage.
- Prescriptions – As long as a doctor prescribes a particular medication, you will likely have coverage with a no-deductible health plan. However, some plans may have their own deductible for prescriptions, so read your policy thoroughly.
- Outpatient Care – Some surgeries, treatments, and other procedures don’t require you to stay overnight. Overnight care is often a covered benefit in a no-deductible health insurance plan.
- Testing – Many lab tests your medical provider may order to help determine what is going on with your health are covered benefits. At a minimum, you can expect to have blood tests, X-rays, urine tests, and CT scans to be covered, subject to the type of plan you have.
- Preventative – Many health insurance plans, deductible or no-deductible, will provide coverage for preventative care. It helps reduce medical costs overall, so this is a benefit that many insurers will give.
- Hospitalization – Most hospitalizations will be covered if you need a procedure to be completed with an overnight stay or give birth. Again, you likely will have a coinsurance here.
- Emergency Services – Many emergency services are going to be a covered benefit.
Cost of No-deductible Health Insurance Plans
The cost of a no-deductible health insurance policy will vary from one insurer to the next and may depend on other factors. On average, you can expect to pay anywhere from $550 to $700 monthly.
Looking at the overall cost of your medical care and not just the premiums you pay is essential. With all health insurance plans, you may have coinsurance and copayments.
When comparing plans, be sure to add in all of the out-of-pocket costs you may have. Even if the monthly premium for a no-deductible plan is higher, it may be less out of your pocket overall.
Advantages of No-deductible Health Insurance Plans
There are some advantages to a no-deductible health insurance plan that you should consider when weighing your options.
- Medical Costs Can Be Less – If you know you have higher expected medical costs over the next policy period, you could spend less out-of-pocket with a no-deductible plan.
- Predictable – Without a deductible, you know that your health insurance policy will pay benefits right away. You will not be surprised by a huge medical bill if you don’t need to pay a high deductible.
- Cash Flow – Having a deductible can be financially devastating in itself. Usually, people have a high deductible, like $1,500, which can be a lot of money for an individual to come up with at once.
- Get Treatment – Many people will put off seeking medical treatment if they have a deductible or less than desirable coverage. With a no-deductible plan, you will be more likely to seek care immediately, knowing it will be paid for.
Disadvantages of No-deductible Health Insurance Plans
Of course, a no-deductible health insurance policy will also have disadvantages.
The disadvantage to a no-deductible health insurance plan is the potential costs. The annual or monthly premium will be more than a standard plan with a deductible. Using the health insurance plan sparingly may cost you more money in the long run.
Can You Get Short-term Health Insurance Without a Deductible?
Short-term health insurance plans can come with low deductibles, but zero-deductible policies are rare due to the way these policies are structured.
Because short-term plans aim to fill any gaps in coverage, like when changing jobs or before open enrollment, their deductibles tend to be higher than traditional health insurance plans.
Since a short-term health insurance policy is not supposed to be a long-term solution, you can expect to see a deductible as high as $10,000.
If you can find a short-term health insurance plan with no-deductible, it will likely not be worth the monthly premium. Short-term policies are always more expensive than a standard plan and often have more exclusions.
What to Consider When Purchasing a No-deductible Health Insurance Plan
People with high anticipated medical costs for the year usually benefit from no-deductible health insurance plans. The downside to these plans is that they aren’t always the most affordable upfront. If you are in the market for a new health insurance plan and are considering a no-deductible option, consider these things:
- Future Medical Expenses/Costs – Will you have a lot of medical expenses over the next year? Are you pregnant? Do you have a chronic illness? These are situations where a no-deductible plan may make sense for you. The overall cost for a no-deductible health plan may be less if any of these are true compared to a standard policy with a high deductible.
- Your Finances – Shelling out a big chunk of money for a deductible is only possible for some Americans. And, if you have unexpected medical costs pop up, it could be financially devastating. A no-deductible plan could help with this peace of mind.
Who Should Consider a No-deductible Health Insurance Plan?
No-deductible health insurance can be a great option if you anticipate high medical costs. When you anticipate you will need significant health care services in the coming year, such as expensive procedures or regular treatments, it may be cheaper to pay higher monthly rates for a no-deductible plan.
Due to paying more monthly or annually to have the plan, no-deductible health insurance policies are only suitable for some individuals or families. A lower deductible generally means a higher monthly premium. No-deductible health insurance policies can be the most expensive since they have a zero deductible.
If you know, without a doubt, that you will have some significant medical expenses over the next year, then you should consider a no-deductible health insurance plan when comparing all of your options.
Alternatives to No-deductible Health Insurance
Luckily, when it comes to health insurance, we have many options to choose from. And, if a no-deductible health insurance plan seems like it may not be a good fit for you, there are a few alternatives that you can consider when shopping around for the best option for you and your situation.
High-deductible Health Insurance
While a no-deductible health insurance plan kicks in and pays for your medical benefits immediately, a high-deductible plan works the opposite. If you need health care treatment, you must pay out-of-pocket until you meet your deductible. Then, once your deductible is met, you will receive benefits from the insurer but may still have a copay or coinsurance.
High-deductible health insurance will be more affordable for the monthly premiums. Because the cost of the high-deductible health plan is cheaper, it may be a better option for someone who doesn’t anticipate any medical treatment for the coming year.
Many high-deductible health insurance plans also allow for a Health Savings Account, which is a great way to save pretax dollars for medical care or supplies. You would not have this option with a no-deductible plan.
Point of Service (POS) Plan
A point of service, or POS plan, is an option for those who can go to in-network providers designated by the insurer. Unlike an HMO plan, you can go out-of-network but pay more out-of-pocket costs. If you can stay in-network, you can consider this option.
You can purchase a catastrophic plan if you are under 30 or over 30 with a hardship exemption. The monthly premiums for catastrophic health insurance plans are low, but the deductibles are very high. You can purchase them to protect yourself against worst-case scenarios, like getting seriously ill or injured. You pay the majority of routine medical expenses.