What is a Health Insurance Deductible?

Understanding Health Insurance Deductibles

Health insurance can be quite complex, with many terms and phrases that may be difficult to understand. One of these terms is the health insurance deductible. This is a crucial aspect of any health insurance plan, and understanding it is key to making informed decisions about your healthcare coverage.

Defining a Health Insurance Deductible

A health insurance deductible is the amount of money that you, the policyholder, must pay out-of-pocket towards covered healthcare services before your insurance company begins to pay. In other words, it's the amount you pay for covered health care services before your insurance plan starts to pay.

How Does a Deductible Work?

Let's say your plan's deductible is $1,000. This means that for most services, you'll pay 100% of your medical and pharmacy bills until the amount reaches $1,000. After that, you share the cost with your insurance company. For example, you might pay 20% and the insurance company might pay 80%.

High Deductible vs. Low Deductible

Health insurance plans can come with either high or low deductibles. A high deductible plan requires you to pay more out-of-pocket costs but offers lower monthly premiums. On the other hand, a low deductible plan has higher premiums but lower out-of-pocket costs. The choice between a high deductible and low deductible plan often depends on your health condition and financial situation.

What Does a Deductible Cover?

The deductible applies to most services covered by your plan, but not all. For example, preventive services like vaccines and screenings are often covered without needing to meet the deductible. However, this can vary from plan to plan, so it's important to read your policy to understand what's covered.

Meeting Your Deductible

Each time you pay for a covered healthcare service, that amount goes towards meeting your deductible. Once you've paid an amount equal to your deductible, your insurance company starts to share the cost of covered services. It's important to note that your monthly premium does not count towards your deductible.

Deductibles and Out-of-Pocket Maximums

While the deductible is the amount you pay before your insurance starts to pay, the out-of-pocket maximum is the most you'll have to pay for covered services in a policy period. After you reach this amount, your insurance will pay for all covered services. The out-of-pocket maximum includes your deductible, coinsurance, and copayments, but not your premiums.

More information on Out-of-Pocket Maximums can be found here. 

Conclusion

Understanding your health insurance deductible is an important part of managing your health care costs. Always be sure to read your policy thoroughly and ask your insurance provider if you have any questions about your deductible or other aspects of your coverage.

If you would like to know whether or not a lower deductible or a higher deductible makes more sense in your situation, contact us today for a no cost review!