photo: Photos8/ BY-NC-SA

By: Emily Beaver

Richard Peterson has never been injured or seriously ill. So when Peterson, a 24-year-old law student, was dropped from his parents' health insurance plan in 2008, he considered not buying insurance. Peterson could have gotten health insurance through his school, George Mason University in Arlington, Virginia, but the plan would have cost him about $100 a month. His wife gets health insurance at work, but getting added to her policy also would have been expensive, Peterson says.

Peterson didn't want to risk going without health insurance, so he searched online for individual health plans and found one that cost about half as much as the policy his school offered. He found a high-deductible health insurance plan at ehealthinsurance.com, a Web site that lets individuals and families search for health insurance plans.

High-deductible or Catastrophic

High-deductible insurance plans are often purchased by people who are self-employed or who work for small companies that don't offer health insurance, says Sam Gibbs, senior vice president of eHealthInsurance, which owns ehealthinsurance.com. These health insurance plans can work well for young people because the plans are affordable and young people are usually healthy, Gibbs says.

High-deductible insurance plans are sometimes called "catastrophic" health insurance plans, although that name can be misleading because they don't have anything to do with catastrophies. These plans have a low monthly premium and a high-deductible, which means you pay more money out of pocket before your insurance company starts covering your costs.

Doing some research can help you determine if a high-deductible plan could be a good choice for you. Most health insurance policies have a lot of fine print, but when it comes to high-deductible plans, there are four terms you need to understand, says Jonathan Pletzke, author of the consumer health insurance book, "Get a Good Deal On Your Health Insurance Without Getting Ripped-Off." They are:

Premium: The monthly cost to maintain your insurance plan, no matter what services you get (or even if you don't use any). In general, the lower the monthly premium, the higher a plan's deductible will be.
Deductible: The amount of money you have to pay before your insurance starts covering your costs. In 2009, the government defined high-deductible plans as having a deductible of $1,180 to $5,800 for individuals, Pletzke says.
Co-insurance: Your plan may include co-insurance, which means after you pay the full amount of your deductible, you share some of your remaining costs with your insurer. Co-insurance is usually expressed as a percentage.
Co-pay: Most insurance plans charge co-pays, which are fixed fees you pay when you go to the doctor's office or emergency room, or need prescription drugs.

Under a high-deductible insurance plan, if you don't have a lot of routine medical costs, like frequent doctor visits or prescriptions, you won't spend much money. But if you have an accident or need an expensive procedure like surgery, you'll probably pay the full cost of your deductible.

Peterson says that he and his wife always keep enough money in a bank account to cover the cost of his $5,000 deductible, in case of an emergency.

Location, Location, Location

The state you live in makes a big difference in how much a high-deductible plan could cost you, Pletzke says. Some states don't allow health insurers to use buyers health histories to set prices, which raises the price for people who are young and healthy.

And if you're not healthy -- or you were sick in the past--a high-deductible plan probably won't work for you. If you have a pre-existing condition like cancer, diabetes, or asthma, insurance companies in most states can deny you coverage, or deny coverage for the care you need related to the pre-existing conditions, Gibbs says.

If you're looking for insurance on your own, Pletzke recommends taking steps to learn about health insurance, evaluate the medical services you need, and search for a good plan. He also recomments visiting the National Association of Insurance Commissioners Web site at www.naic.org to get more information about insurance plans.

Gibbs says buying some kind of health insurance is always better than going without it, even if you can only afford an insurance plan with a very high deductible. That's because once you let your health insurance lapse, you lose your right to get coverage of pre-existing conditions, Gibbs says. Also, when you don't have health insurance, you pay the full price for medical services. But when you have insurance, you'll get medical services at the discounted rate insurance companies negotiate with health care providers. He recommends doing research online and working with a licensed health insurance agent in your state to find the right plan.

Previously:

• Generation Invincible
• Ten Health Care Terms You Need to Know
• Ten More Health Care Terms You Need to Know