A health insurance deductible is the amount you pay toward your covered medical bills before your health insurance plan starts to pay. It varies by plan.
Deductibles are a big part of deciding which health insurance is right for you and your family. You need to understand what a deductible is, how it works and how it affects your premium.
Premiums
A premium is a payment to your health insurance company that keeps your coverage active. It’s usually paid monthly and can be billed in different ways.
Deductibles, copayments, and coinsurance are the other costs you pay for health care services. These are all part of what’s known as cost-sharing, which reduces the financial risk your health insurance company faces.
You can’t always count premium payments toward your deductible, but they do help lower your out-of-pocket costs. You can also use an income-based premium subsidy, which is available to some people who buy their coverage on the Health Insurance Marketplace.
Choosing the right deductible depends on your lifestyle and health needs. If you’re generally healthy and don’t expect to have many medical expenses in a year, a high deductible may be best. But if you have an ongoing health condition or large family, a low deductible may be better.
Copayments
Copayments are a type of cost share that helps pay for healthcare services you receive. They vary depending on your plan and what kind of service you are receiving.
For example, a doctor visit will have a copay. Similarly, an emergency room visit will have a copayment.
In a deductible health insurance plan, you will typically have to meet a deductible before your insurance provider will pay for some or all of your healthcare services. After you meet the deductible, you will then pay coinsurance on your remaining costs until you reach your out-of-pocket maximum for the year.
The terms copay and deductible are often used interchangeably, but they are actually two separate parts of the health insurance puzzle. It is important to know the difference between them in order to use your plan effectively.
Coinsurance
When you choose a health insurance plan, you must consider premiums, deductibles and copayments. These are all important cost-sharing features that work together to make sure you can access health care as needed and pay less for it over time.
Deductibles are the amount you must spend out of pocket before your health insurance company starts to cover claims. They reset each year and usually apply to both individual and family plans.
Coinsurance is the percentage of costs you and your health insurance plan share when you meet your deductible. It's a common practice in many insurance plans.
It's important to understand the difference between a deductible and coinsurance so you can compare plans and decide which one is best for you. For example, a healthy person who doesn't have any health issues may be better off with a higher deductible than someone with an untreated chronic illness.
Out-of-pocket expenses
A deductible is the amount you must pay for covered health care services before your insurance starts to cover them. It may be low or high depending on your situation.
For most people, it’s not a big deal to meet a deductible. It helps to be prepared and to read your insurance policy carefully.
You’ll also need to consider what your copayments and coinsurance will be if you have to pay for medical services. If you have a coinsurance plan, you may be required to pay 20% of your medical bill until you meet your deductible, then the health insurance company will pick up the rest.
Your health insurance plan may also have a limit on your out-of-pocket expenses, called an out-of-pocket max. This limit resets each year so that your total out-of-pocket costs don’t go over the maximum. This can protect you from astronomical health care costs if you have a major illness or injury and have to seek out-of-network medical services.