Health insurers ordinarily begin calculating what you’ve spent on medical bills from the very first expense you incur. That’s what the insurance industry calls first-dollar coverage.
This doesn’t mean that the insurer pays all of your expenses from the start. Most plans include a
deductible,
which is an amount that you must pay out-of-pocket for medical care before your insurer starts paying the portion of your bills that it will cover. So for example, if you had a deductible of $200, you’d pay the full cost of doctor’s visits, prescriptions, and other medical services until the total reached $200. After that, your insurance would cover further expenses according to the terms of the plan — paying a percentage of each covered expense, paying all but a co-pay, or paying 100% of the cost.
Introducing high deductibles
High-deductible health plans (HDHP)
are a newer and increasingly common type of health insurance. As the name indicates, these policies differ from traditional insurance because you must meet a higher deductible — before the plan helps cover your costs. But because insurers pay less in claims with HDHPs, the
premiums
tend to be lower than for traditional first-dollar or low-deductible plans.
The trade-off is that while you’ll spend less on premiums, you assume more responsibility for paying for your heathcare before you’ve satisfied the deductible. To help you manage those costs, once you’re enrolled in an HDHP you’ll be eligible to open a special
tax-exempt
account known as a
health savings account (HSA).
This doesn’t mean that the insurer pays all of your expenses from the start. Most plans include a
