What Is a Health Insurance Deductible?

A deductible is the amount of money an individual will pay before insurance kicks in each year and covers the rest of a medical bill or service. At the beginning of the following year, it resets to zero. The deductible makes up a large percentage of potential medical costs. Understanding how it affects your coverage is important in keeping you out of medical debt and able to access the coverage you need. By the end of this article, you will have the tools to make an informed decision when selecting your health care plan. 

How Health Insurance Deductibles Work

Let's break down an example to demonstrate how deductibles work. If a person had a covered surgery that costs $5,000 and the deductible on their plan is $1,000, they will have to pay that amount before insurance covers the other $4,000. Generally, plans have a list of covered services that they will pay for before your deductible is met, such as preventative services like check-ups, shots, screening tests and physicals. Make sure to read your plan to get the comprehensive list of covered services. 

How is a deductible different from a premium?

A premium is how much you pay monthly for your health insurance, like a subscription. You pay that amount no matter what, each month or yearly. For deductibles, you only have to pay up to the amount, and then insurance covers the rest of the payments. Each year, the deductible resets at zero, and you will have to pay out of pocket once again. Premiums and deductibles offset each other. Plans with lower monthly premiums have higher deductibles and plans with higher monthly premiums usually have lower deductibles.

Types of Health Insurance Plans With Deductibles

High-deductible health plans (HDHPs)

HDHPs are plans with a higher deductible and lower premium. That means that your monthly costs are low, but the amount that you have to pay out-of-pocket is higher until insurance kicks in. These plans are ideal for people with excellent health who do not anticipate needing to use their medical services often. However, you will pay all of your medical costs until the deductible is met so it has the potential to be costly if you need to see the doctor. These plans often combine with a Health Savings Account in order to prepare for medical costs. 

Traditional or copay plans

On the other hand, traditional plans mean that you will pay only your copay until the deductible is met. These plans have a lower deductible and a higher monthly premium. These plans are ideal for someone who makes more frequent visits to the doctor. 

Determining Your Deductible

Now that you know what a deductible is, where do you find how much yours is? First, when you are exploring plans, there is a write-up of your policy details called the explanation of benefits. Next to the various types of medical services, it should list the deductible that you will pay if those services become necessary. Your online portal or app will also display the benefit information. If you have questions, feel free to reach out by email or phone to get clarification on coverage. 

Factors influencing deductible amounts

Plan type and coverage level

Above, we mentioned that deductibles will decrease as your monthly payments (premiums) increase. The plan you choose will directly influence how much you pay as a deductible. Low deductible plans have more immediate access to care and are better suited for individuals who have health needs. The ACA marketplace has four metal-tier plans: Bronze, Silver, Gold, and Platinum. With the Bronze plan, you pay 40%, while insurance covers 60% of the costs. Silver splits the costs 70:30, Gold 80:20, and Platinum coverage is 90% paid by insurance, with the individual picking up only 10%. If you qualify for cost-reduction programs, you must pick a minimum of the Silver level plan in order to receive those benefits. 

Individual vs. family deductibles

There are two ways that deductibles can be laid out in a plan: individual or family. Family plans allow for more than one person in the family to contribute to meeting the deductible with qualified out-of-pocket payments. Individual deductibles are met by only one person's related medical costs. Family deductibles are likely to be a higher number than individuals as they account for more people overall. Families do not automatically have family deductibles, but it can be useful when 2 or more family members utilize their coverage. 

How Deductibles Affect Your Healthcare Costs

Depending on the plan that you choose, there is a chance that all medical expenses are out of pocket until the deductible has been met. That means any money you spend toward medically necessary care counts toward your health insurance deductible as long as it’s a covered benefit, but it will be you who pays. Plans that the ACA regulates have an out-of-pocket maximum of $9,450 for an individual and $18,900 for a family.

Just because you have met the deductible amount does not mean there are no other payments that have to be considered. Copayments and coinsurance are paid directly to the healthcare provider and not the insurance. Even when you reach your deductible amount, you may have to pay a copay for doctor’s appointments, prescriptions, urgent care visits, and more. Coinsurance does not change either. It is a set percentage of a hospital bill or service that you pay and does not influence deductibles. ACA marketplace counts deductibles, coinsurance, and copays towards your yearly out-of-pocket maximum.

Examples

Routine doctor visits often have $20 to $30 copayments and are not counted towards your deductible. Copays, coinsurance, premiums, out-of-network services, and certain uncovered services are also not counted toward the deductible. Healthcare services covered under your plan will count along with in-network or referral appointments. Additionally, surgeries, lab tests, MRIs, CAT scans, and hospitalizations typically are counted towards the deductible. 

Strategies for Managing Health Insurance Deductibles

Though sometimes medical needs are unavoidable, there are some things you can do to stay on top of your health and avoid high medical costs. In the next few paragraphs, we’ll discuss utilizing your benefits to stay healthy and planning ahead. 

Budgeting for out-of-pocket expenses

We cannot always plan for medical expenses, but if you know that you will need an expensive health service (like a knee replacement) or just want to prepare for the future, it is a good idea to set aside funds for those expenses. That way, when the medical bill comes, it will lessen the financial blow. Some plans have the option for a Health Savings Account, where money is taken pre-tax from your income and added to an account to be used toward qualified medical expenses. These plans have the added benefit of being tax-free and can be written off when you file your taxes yearly. When available, an HSA can lower your medical costs and stretch your money. 

Utilizing preventive services and wellness programs

All ACA-compliant plans have a list of preventive services that are covered from the time your plan starts. These services allow you to stay on top of your health so that you can stay out of doctor and medical debt. Utilizing these services may mean that you can select a plan with a higher deductible and lower monthly costs.

Frequently Asked Questions (FAQs)

• Can deductibles be changed during the policy year?
• What happens after the deductible is met?
• Do all healthcare services count towards the deductible?

Comparing Deductibles When Choosing a Health Plan

It is important to explore all options available to you during the enrollment period. Take a look at your medical needs and read through the plan coverage options to find the best fit. For those who do not anticipate needing medical services, it is worth it to take the risk and save money on lower premiums. Those who know they will be frequently using medical services may want a lower deductible and to meet it early so medical costs can be split or covered by insurance. Ensure you select a plan with a premium and copay in your budget and a deductible that is not too far out of reach. 

How To Find a Good Health Insurance Agency

Visit Expertise.com’s website to view a selection of health insurance providers or discuss your options with our agents using our concierge service. Allow us to make this process easier on you as we guide you towards the coverage you need.