What Is a Health Insurance Deductible?

 What Is a Health Insurance Deductible?

Understanding your out-of-pocket medical costs, including deductibles, is an important part of managing your health-care costs. Here’s everything you need to know when it comes to your health insurance deductible and how it works.

How does a health insurance deductible work?

A deductible is a set amount you may be required to pay out of pocket before your plan begins to pay for covered costs. Not every health plan has a deductible, and this amount may vary by plan. Every year, it starts over, and you’ll need to reach the deductible again for that year before your plan benefits start. Keep in mind that only what you pay for covered medical costs counts towards your plan’s deductible.

Here are a couple important things to keep in mind:

• All Marketplace plans must cover the full cost of certain preventive benefits even before you’ve met the deductible. This requirement is mandated by the Affordable Care Act. This might include services like wellness check-ups, vaccinations, or certain preventive screenings. These benefits are covered without cost sharing, even if you haven’t met your yearly deductible yet.
• Cost sharing amounts like copayments and coinsurance don’t usually count towards your deductible. In fact, you generally don’t owe copayments or coinsurance until you’ve met your deductible; that’s when your plan starts to cover its share. Before you reach the deductible, you typically pay the entire cost for covered expenses out of pocket.
• Family plans may have two deductibles. If your health plan covers you along with other dependents, you may have an individual deductible, which applies to each person, and a family deductible, which applies to the whole family.
• Once you’ve reached your out-of-pocket maximum, your plan covers 100% of costs for the rest of the year. Some plans may have an annual cap on covered medical costs, known as your maximum out-of-pocket. This is separate from your deductible, and usually a higher amount. Once you reach this amount, your insurance will pick up the entire bill for all other covered care for that year.

• Should I have a high or low deductible?

  As mentioned, the health insurance deductible may vary from plan to plan. It’s important to take your time to compare plans side by side, since higher plan deductible may be offset by lower cost sharing or premiums, and vice versa. Some plans (typically HMOs) may not have a deductible at all. These plans are referred to as zero-deductible plans. Zero-deductible plans typically come with higher premiums while high-deductible plans typically come with lower premiums.

  If you frequently visit doctors or take multiple medications, a zero-deductible plan may suit your budget and coverage needs. If, on the other hand, you’re generally healthy and don’t use medical services often, you may find you’re unlikely to reach your plan’s deductible every year. In that case, it may make more sense to find a plan with a higher deductible if it’s offset by lower monthly premiums. You may find you end up paying less overall this way.

• High deductible plans and Health Savings Accounts (HSAs)

  Another option to consider are high-deductible plans, which usually have low monthly premiums. These plans may appeal to you if you’re generally healthy, don’t anticipate getting sick, and don’t visit the doctor often or take many prescription drugs.

• What does “no charge after deductible” mean?

  This means that once you have paid your deductible for the year, your insurance benefits will kick in, and the plan pays 100% of covered medical costs for the rest of the year. After you’ve reached this limit, you will not have co-payments, coinsurance, or other out-of-pocket costs.

• How should I choose a health insurance deductible?

  Every person’s situation is different, and what works for your needs will depend on your health needs, budget, and more. As you’re considering your options, it’s important to take the time to shop around and compare costs. As mentioned, deductibles and other out-of-pocket costs may vary quite a bit from plan to plan. Comparing costs is easy and could save you money.