Traditional Health Insurance Plan vs. High-Deductible Plan: What's the Difference?

It's more than just the cost of your deductible

Doctor's receptionist taking insurance information from a patient
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When choosing a health insurance plan, you need to understand exactly what costs you will be responsible for when you visit the doctor, see a specialist, or have a procedure. Your health care costs can have a significant impact on your financial future, so it’s important to understand and plan for the cost of health insurance and any related expenses.

While there are many different kinds of health insurance plans to choose from, two popular ones are traditional health insurance plans and high-deductible health plans (HDHP). Traditional plans have lower deductibles and higher premiums, while HDHP have higher deductibles and lower premiums. Learn more about the differences between the two.

What's the Difference Between a Traditional Health Insurance Plan and an HDHP?

 Traditional Health Insurance High-Deductible Health Plan
Has copays until patient meets deductible; then patient may pay coinsurance May not have copays; patient pays full cost until deductible is met
Lower deductible Higher deductible
Higher premiums Lower premiums
Health Savings Account may not be as important Often combines with Health Savings Account

Plan Structures

A traditional health insurance plan works on a system of copays and deductibles. The plan helps to pay your doctor bills, lab tests, and prescriptions. With a traditional health insurance plan, you may be financially responsible for paying copayments (or copays), deductibles, and coinsurance.

However, once you have met your deductible, you are usually only responsible for coinsurance, until you reach your out-of-pocket maximum. It’s important to stay within network when choosing a health care provider or going to the doctor in order to keep your costs down with a traditional health insurance plan.

On the other hand, a high-deductible health plan has a high deductible that you must meet before the insurance will start paying its share of your office visits, lab tests, and prescriptions.


In order to qualify as a high-deductible plan in 2021, the deductible must be at least $1,400 for an individual and $2,800 for a family. Often, HDHPs are combined with a Health Savings Account (HSA) to help offset the out-of-pocket costs.


If you are worried about how much each insurance plan could cost you, try adding up the annual cost of each premium and the maximum out-of-pocket expenses for each plan. This will give you an estimate of how much each plan could cost you. You also need to factor in the deductible, as this gives you an idea of how much money you will have to pay earlier in the plan year.

Traditional Insurance Example:

Let’s say you have a traditional insurance plan that costs $290 monthly, with an annual deductible of $1,000, a coinsurance of 20%, and an out-of-pocket maximum of $2,000. This plan would cost you, at most, $5,480.

$290 x 12 = $3,480 + $2,000 = $5,480

If you spend to the max on this plan, it would look like this: You pay copays and all costs until you reach your $1,000 deductible. After that, you would pay 20% of all costs for the remaining $1,000 until you reach your out-of-pocket maximum.

HDHP Example:

If you have a high-deductible insurance plan that costs $110 per month and has a deductible of $5,000, a co-insurance of 50%, and a maximum out-of-pocket of $8,000, you would end up paying, at most, $9,320.

$110 x 12 = $1,320 + $8,000 = $9,320

If you spend to the max on this plan, it would look like this: You pay copays and all other costs until you reach your $5,000 deductible. After that, you would pay 50% of all costs for the remaining $3,000 until you reach your out-of-pocket maximum.

Which Is Right for You?

Deciding on your health care plan comes down to your personal circumstances and financial situation. Traditional health insurance plans have lower deductibles, so this could be a better option for you if you go to the doctor often or expect to have major medical expenses, such as having a baby, in the near future.

Alternatively, high-deductible health plans have a high deductible that you must meet before insurance will pay its share of office visits, lab tests, and prescriptions. They also have lower premiums, which can save you money in the long run. If you are healthy and are looking for a way to cut costs, this may be a great option to consider. However, you want to ensure that you have the liquid capital to cover the high deductible.

Try making a list of your projected health care needs over the next few years, then calculating which plan makes the most sense for you financially.


If you decide to go with a high-deductible plan, you should take advantage of an HSA, which is a tax-advantaged savings account to help pay for medical expenses. This can offset your medical expenses significantly.

A Best-of-Both-Worlds Option

Remember, there are different types of health insurance, including plans available through your employer, through an independent health insurance company, and through health exchanges under the Affordable Care Act. Compare all of your options before making your choice. You may be able to find a plan that provides the best of both types of insurance.

When choosing a plan, be sure you take a close look at the following factors:

  • Your health
  • Financial obligations
  • Family members who need coverage
  • Risks that you feel comfortable taking

In the end, it may turn out that neither a traditional health insurance plan nor an HDHP is the best option for you. Don't forget that these aren't the only two types of plans available. In that case, considering other options may help you find a plan that checks more of your boxes when it comes to health care coverage.

The Bottom Line

The most important thing is to consider your situation. If you go to the doctor often and want to make sure you're sharing the cost of treatment with your insurance company, the traditional plan might be right for you.

If you're relatively healthy and never visit the doctor outside of your annual checkup, then the HDHP might be the best option. It would likely not cost you much more than the cost of your premium; this would be significantly less than the premium on the traditional plan.