What is a health insurance deductible? What does it mean for you, and how much of a factor should it be when you’re weighing your coverage options? Let’s dive in to this important insurance topic.
“What Is a Deductible?”
In health insurance, your deductible is the amount you pay each year for eligible medical services, before your insurance plan begins to share in the cost of covered care.
So, for instance, if you have a plan with a $2,500 deductible, you will pay 100 percent of your eligible healthcare costs until you’ve spent $2,500 in a single year (that’s the twelve months—between the dates your insurance plan begins and ends). After that, your insurance company will begin sharing the cost of your medical bills, typically only leaving you to pay your agreed-upon portion of coinsurance (and maybe copayments, or copays), rather than having to cover the bills in their entirety.
The amount you’ll have to pay for your annual deductible can vary anywhere from a few hundred dollars up to thousands of dollars, depending on your plan.
“What Are Copays and Coinsurance?”
Your deductible is often thought of as one of your “out-of-pocket” healthcare costs, along with copays and coinsurance. These are important terms to understand.
A copay is a fixed amount that you pay for a health service at the time of service. The amount can vary by the type of service (so, for instance, seeing a specialist may come with a higher copay than seeing a primary care doctor). Depending on your plan, you may be responsible for paying the copays before you’ve met your deductible for the year, and after, along with coinsurance.
Coinsurance is the share of your medical costs that you pay after your deductible has been met. So, for instance, your insurer might cover 70 percent of the cost of a given service, leaving you to pay the remaining 30 percent on your own.
“What Expenses Count Toward My Deductible?”
One of the most important things to understand about your deductible is which of your medical expenses will count toward your total, and which will not.
Broadly speaking, costs that typically count toward meeting your deductible might include:
- Hospitalization/ER visits
- Surgery (and related costs, such as anesthesia)
- Diagnostic lab tests and exams (including blood tests, MRIs, CAT scans)
- Medical devices
- Outpatient physical treatments (including rehabilitation services, physical therapy, etc.)
Expenses that do not typically count toward your deductible include:
- Monthly premium
It’s important to note that copays will not always count toward your deductible; whether or not they do will come down to the specifics of your plan. Not all plans use copays in the first place, and many use copays in conjunction with coinsurance and deductibles, meaning that you could continue to be responsible for copays before and after you’ve met your deductible.
Is a Deductible the Same as an Out-of-Pocket Maximum?
While it’s easy to confuse the two, your plan’s deductible is not the same as its out-of-pocket maximum.
An out-of-pocket maximum is the absolute limit on what you will have to pay for covered health services in a given year, including your deductible and all copays and coinsurance. Once you’ve reached your annual out-of-pocket maximum, your insurance company will pay 100 percent of your covered costs for the rest of the year.
As an example, you may have a plan that has a $2,000 deductible and a $5,000 out-of-pocket maximum (please note: these numbers are simplified, for illustrative purposes in this article—actual amounts will vary). Let’s say that you need to go in for a surgery, and the total cost of that surgery was $50,000. $2,000 of that $50,000 bill will count as your deductible. Then you’ll also be responsible for paying your share of the covered services listed as coinsurance services on your plan (such as the 70/30 example we mentioned above). This means you’ll make payments until you’ve spent an additional $3,000, bringing your total up to $5,000. Once you’ve paid $5,000, your (hypothetical) out-of-pocket maximum, your plan will cover all remaining costs, as well as any additional medical expenses you may accrue for the rest of the year.
Can a Plan Have Multiple Deductibles?
In some cases, your plan may include several different deductibles operating together. For instance, your plan may feature both an individual deductible and a family deductible. You may face different deductibles for in-network and out-of-network services (with the out-of-network deductible typically being much higher). Finally, your plan may have a separate pharmacy deductible for prescription drug coverage.
How Do I Choose the Deductible Amount That Will Work for Me?
Different plans will come with different deductibles, and there generally isn’t any one deductible that’s better than another. Ultimately, making the best decision for you will come down to your unique wants and needs. It’s also important to evaluate the entirety of an insurance plan, not just the deductible.
For example? If you’re relatively healthy, and generally only go in for a few routine medical procedures per year, it may save you significantly over the course of a year to opt for a plan with a higher deductible, since this will often mean a lower monthly premium, and lower payments overall for the year.
It’s also important to remember that there are many different ways to supplement your health insurance plan and keep costs low by filling in some of the gaps of your coverage, from setting up a health savings account (HSA), to taking advantage of free preventive care services, to increasing your level of coverage with an accident or critical illness rider.
In short? You have options, and there are a lot of different factors to consider when it comes to finding the health insurance plan that will truly work for you. Your deductible is just one part of a bigger whole.
Taking stock of your entire financial and health picture can be difficult to do all alone. Also difficult? Navigating complicated insurance company websites and resources without someone there to offer guidance and education.
That’s where the Enrollment Specialists would be happy to step in and help.
Let the Health Insurance Experts Help
Led by our founder and CEO Matt Peebles, the Enrollment Specialists believe that there is a health insurance plan out there for everyone. We take time to truly get to know what matters to our clients, so we can help them customize and choose the health insurance plan that will work best for their needs, making sure their costs are minimized, while their coverage is always at its peak.
We know that health insurance isn’t cookie cutter, and so we get specific in our thinking. At every step of the way, we’ll take care to make sure you feel well-informed, supported, and confident.
Even better? It will never cost you a cent to work with the Enrollment Specialists. And whenever you need help or guidance, for the entire life of your policy, Matt will always be just a quick phone call or email away, ready to step in and help set things right.
Curious about your health insurance options? Want to talk over what your perfect plan might look like, deductible and all? Have any more questions about finding coverage? We’re here to help. Drop us a line today to keep the conversation going.