Health insurance that begins on the first day of the policy covering the first dollar you need to spend -- with no deductible -- sounds terrific. Not so fast. Zero-deductible health insurance can be difficult to find, and compromises you'll likely make to eliminate your deduction might wind up costing you more than a policy with a much higher deductible but considerably lower premiums.
If you're insured through an employer's group health insurance plan, it's unlikely you have a zero-deductible policy. Each state regulates insurance companies that sell individual policies within its borders, so whether you can buy an individual zero-deductible policy depends on where you live. Zero-deductible polices are unavailable in most states.
An insurance company may lower your premiums if you are willing to accept a higher deductible, meaning the company will not have to pay a certain amount of medical costs. The company also has statistical evidence that you will try to limit your out-of-pocket costs by staying under your deductible limit. With no deductible, you have no incentive to hold your medical bills down, so you may expect the company to increase your rates accordingly.
Zero-deductible health insurance plans typically employ two cost-sharing techniques to mitigate the company's responsibility for your healthcare costs: co-payments and co-insurance. Co-payments are flat fees applied to certain routine medical expenses. For example, you might be charged $15 for each doctor's visit, $10 for each prescription and $25 for specified laboratory procedures. Co-insurance sets a certain percentage of a covered cost that you will pay. For example, the policy may set a rate of 20 percent for you to pay to medical providers on its network list and 50 percent for out-of-network treatment. Typically, a lower deductible will result in higher co-pay and co-insurance rates.
Zero-deductible policies are more likely to exclude coverage for what companies regard as conditions of choice -- pregnancy, for example, or tobacco cessation treatments.
As with deductible policies, zero-deductible insurance generally includes annual limits on your out-of-pocket costs for your co-insurance. For example, one insurance company that offers a no-deductible policy in Texas caps the out-of-pocket costs at $3,000 per person and $6,000 per family. That policy does not exclude co-payments -- except those for drugs -- in compiling annual out-of-pocket costs.
Even if you have an overall deductible on your health policy, your policy may offer zero-deductible coverage for prescriptions, dental care or vision coverage. Check the premium difference to see if a portion of zero-deductible coverage might prove beneficial.
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