Your health insurance plan’s deductible is the amount you pay out-of-pocket for medical care before your coverage kicks in. however, there are some expenses for which the deductible does not apply. For these, you are fully covered by your health insurance policy. Health insurance deductibles can vary widely depending on your specific policy, but generally, if you have a lower annual deductible, the plan requires you to pay more in premiums.
How does a health insurance deductible work?
A health insurance deductible is the amount of money you need to pay personally before copayment and coinsurance benefits can be used. In other words, it is the dollar amount you must spend on medical expenses before the health insurance company begins to pay for your health care services.
unlike deductibles in other forms of insurance, which work per incident, deductibles for health insurance apply annually and, in general, in all services, with some exceptions. The Affordable Care Act also established a maximum deductible amount, which is reviewed each year by the Department of Health and Human Services. in 2021, the maximum deductible for an individual policy was $7,200 and $14,400 for a family.
how to choose a deductible level
The two main considerations when selecting a deductible are your ability to bear the risk and the amount you expect to spend annually on health care coverage. For example, if you have recurring medical expenses every month, such as prescription drugs, you may want to select a plan with a lower deductible that allows you to meet that deductible quickly.
On the other hand, if you’re relatively young and don’t get sick frequently, selecting a plan with higher deductibles may make more sense. As a result, plans with higher deductibles generally have lower premiums. Until these deductibles are met, you will not receive any of the cost-sharing benefits of having coverage.
See also: Insurance License Applicant Information
For those with low expected health care expenses, a more affordable health insurance plan with a higher deductible may make more sense. This lowers your guaranteed out-of-pocket costs by lowering the premiums you pay each month. the only thing you need to consider when selecting a plan is whether or not you have the financial means to cover the required deductible in the event of an incident.
Understanding this trade-off is critical to choosing a plan and finding the best health insurance for your needs. A health insurance plan’s deductible structure is important in deciding which plan to choose, as it dictates when the insurer actually begins to pay.
what is the difference between an individual and family deductible?
Each health insurance plan stipulates both an individual and a family deductible, and the family deductible is usually double the individual deductible. It is very important for households with multiple family members covered under the same plan to understand how these two values dictate their cost-sharing benefits.
Starting in 2016, insurance plan deductibles were “built in.” For each household, the health insurance company began tracking the total amount paid in deductibles for the entire family, as well as the amount paid in deductibles for the care of each individual in that family. the company then begins paying benefits once one of two circumstances is met.
Typically, there are two scenarios that play out for each individual in the family and the family as a whole:
medical vs prescription deductibles
Another aspect of deductibles is that many insurance plans treat prescriptions differently than other services.
In such cases, there is a prescription deductible and is counted separately from all other medical care. Policyholders of those plans must pay for drugs up to the specified amount before the plan covers these costs.
People who have a high proportion of their medical expenses generated by prescription drugs may actually benefit from having a separate prescription deductible as these amounts are typically much smaller than their medical counterparts . plans with a prescription drug deductible make it easier for someone with high prescription drug costs to start receiving the cost-sharing benefits offered by the policy.
other exceptions to deductibles
While most cost-sharing benefits only kick in once deductibles are met, health plans can and do make some exceptions where copays kick in beforehand. for example, all plans are required to cover preventive care at no cost to the consumer.
Other exceptions to the deductibles offered by the plans include:
health insurance deductible example
Let’s say you have a health insurance plan with a $1,000 deductible. During the year, a medical event arises with a bill of $4,500 that is covered by your health insurance plan. Your health insurance policy will pay this bill since it’s covered, but you’ll need to pay the deductible first. your best option would be:
Now let’s say you have a health insurance plan with a $1,000 deductible and 20% coinsurance after you meet the deductible. During the course of the year, you receive a $4,500 medical bill that is covered by your health insurance policy. here, your best option would be: