Why Adding a Deductible Could Be the Easiest (and Smartest) Way to Cut Your Health Insurance Costs
With global medical inflation out of control, many organizations are facing a tough reality: premium hikes are hitting hard, and budget flexibility is shrinking. In this environment, employers are looking for cost-saving strategies that don’t sacrifice quality of care. One of the simplest and most effective? Introducing a deductible.
At One World Cover, we’re strong advocates of deductibles. In fact, we believe that if you’re serious about managing your health insurance costs sustainably, a deductible should be high on your list — not just as a short-term fix, but as a long-term strategy that works.
How Much Can You Save?
The savings from even a modest deductible are substantial. We regularly see that:
- A US$500 deductible can lower premiums by 5-10%
- An US$800-US$1,000 deductible often results in a 20% premium reduction
- Higher deductibles (US$1,000+) can lead to even greater savings, depending on the structure of your plan
That’s not just a one-time discount — it’s savings every single year, which compound over time. For large organizations, this can amount to hundreds of thousands of dollars in annual savings.
What Is a Deductible — and How Is It Different from Other Cost-Sharing Terms?
A deductible is the amount an insured person must pay out of pocket each policy year before the health insurance plan starts covering certain benefits. For example, if your plan has an US$800 deductible, you will need to pay the first US$800 of eligible medical costs yourself before the insurer begins covering those expenses.
In some countries this is sometimes referred to as an excess — though some insurers may define them slightly differently depending on the policy structure.
It’s also important to distinguish a deductible from other forms of cost sharing such as co-pays and co-insurances (terms that are also commonly used interchangebly). A co-pay or co-insuarance is:
- A fixed amount you pay each time (rather than an annual amount) you receive a specific service, such as US$20 for a GP visit or US$50 for a specialist
- A percentage of the cost you must pay after meeting your deductible — for example, 20% of the bill, with the insurer covering the remaining 80%
While all of these mechanisms shift some of the cost burden to the insured, deductibles tend to have the most immediate and significant impact on reducing premiums. However, because terminology can vary between insurers and regions, it’s essential to check how these terms are defined in your specific plan.
Why Deductibles Work
Deductibles reduce costs by shifting a small portion of the financial responsibility to the insured individual, typically for lower-cost or routine claims. Insurers price plans with deductibles lower because they expect fewer minor claims to be submitted — and those that are submitted are partially covered by the employee.
More importantly, deductibles are simple and effective:
- They don’t require changing your insurer
- They don’t require switching plan providers or losing important benefits
- They protect your plan’s core function: covering major, unexpected costs
In fact, a well-structured deductible preserves your staff’s access to high-quality care when they need it most — while helping your organization remain financially sustainable.
Why Now?
Outside the USA, deductibles have historically been less common — but that’s changing. As global premiums rise, many employers are adopting deductibles as a standard feature of their plans.
If your workforce includes a high percentage of Americans, the good news is: they’re already used to it. In the USA, deductibles of US$1,000 or more are the norm. Internationally, we recommend at least a US$500 minimum deductible if you’re serious about controlling costs.
But What About Employee Pushback?
It’s a fair question — and we’ve helped many clients introduce deductibles without backlash. The key is clear communication and positioning the deductible as part of a bigger picture strategy that ensures as a company you can continue to provide fantastic health insurance cover when people need it most for a major illness (such as millions of dollars in cover for cancer) or following a major accident.
We often recommend softening the impact by turning the savings into a wellness benefit. For example:
Wellness Fund: Give employees back part of the savings as a wellness bonus — their own money to use however they like: gym memberships, therapy, new running shoes, a better bike, or even just cash.
It becomes a health-positive message: “We’re making a change that helps keep your insurance sustainable and gives you money back for wellness.”
Family Deductibles
Concerned about the impact on families? There’s a simple solution.
Most plans allow you to cap the family deductible at 3x the individual amount. That means a family of five with a US$500 deductible won’t face US$2,500 in potential out-of-pocket expenses — instead, it’s capped at US$1,500 total. It’s a fairer, more manageable structure for larger households.
Is a Deductible the Right Choice?
Deductibles are powerful — but they’re not for every plan. They don’t necessarily drive long-term behavior change like directed co-pays (such as lower co-pays at lower-cost clinics), and they won’t prevent high utilization on their own.
However, for many groups — especially those facing a strict budgeting cycle — deductibles are the easiest, cleanest way to make a meaningful dent in your premium costs without cutting benefits.
At One World Cover, we help our clients:
- Model the financial impact of different deductible levels
- Communicate changes effectively to faculty and staff
- Preserve the value and integrity of their health plans
Adding a deductible might not sound revolutionary — but when you’re facing double-digit renewal increases, it can be the fastest way to restore control. For organizations paying hundreds of thousands or even millions in annual premiums, a 20% savings isn’t just nice — it’s game-changing.
If you’re considering introducing a deductible — or want to understand how it could work for your plan — get in touch. We’re here to help you structure smarter, more sustainable health insurance solutions that support both your people and your bottom line.
Michael Pennington, Customer Experience Director, One World Cover – [email protected]
