Do you wonder what a health insurance deductible really means? Even though you hear it a lot and most likely pay a deductible in your insurance plan.
You will learn all about health insurance deductibles, their definition, and how they work, including examples. You will also learn the two deductible policy types, things you need to understand about your policy's deductible, and the factors you should consider when purchasing a plan and selecting a deductible.
If your deductible is $200 and your covered health service costs $1,000, you will have to pay $200 before your insurer picks up your healthcare tab. You also don't have to pay your deductible in one go, as it’s valid for a year.
This article's information has been collated from various trustworthy sources to ensure the statements made within this article are factual. Some of these sources include Healthcare.gov, various health insurance providers, the Affordable Care Act, and health industry watchers.
What Are Health Insurance Deductibles?
Most health insurance policies come with a yearly deductible, which is the sum you are contractually obligated to pay before your health insurance policy begins to cover you. For some health insurance plans, the deductible is low, while others don't have one at all.
In many ways, your plan's deductible is the only thing that stops you from getting your plan's full health benefits. It can be seen as the first obstacle you have to surmount before you can reap the rewards your premiums paid for.
This is why understanding your policy and saving you money are linked to managing your deductible. If you can't keep a record of your deductibles or always lose track, there are now online services that help streamline this process.
Health insurance deductibles are the minimum balance you are required to pay before your health insurance policy begins to cover your associated medical expenses. This definition is according to HealthCare.gov.
For instance, if your deductible is $2,000 and your hospital visit costs $3,000, you would be liable for the $2,000 part. This means that according to your health insurance plan, you will have to pay a required portion of your healthcare bills before your health insurance provider is liable to pay the remainder.
This remainder is only paid after you have met your end of the bargain.
What Are The Types Of Deductibles Available?
There are two types of deductible policies, namely low-deductible and high-deductible insurance policies.
Low Deductible Policies
These health insurance policies come with lower policies and sometimes even lower premiums than policies with higher deductibles. These policies are perfect for individuals that need expensive healthcare services or require a lot of care.
A low deductible policy, as its name states, come with a lower entry for the insurance company to cover healthcare costs compared to high-deductible policies
High Deductible Policies
These policies, as the name state, have higher deductibles compared to most health insurance policies. So, if you opt for a high deductible insurance plan, you have to pay more out-of-pocket costs before your insurance provider starts covering for the rest. However, they do provide tax advantages and a bit of flexibility that can be beneficial to some people.
Additionally, high deductible policies generally come with comparably lower premiums. These plans also include an HRA Health Reimbursement Arrangement or Health Savings Account, an account where money can be deposited for future health costs without tax.
How Does A Deductible Work?
Once your deductible has been met, your health insurance provider will generally only request that you pay a percentage of your healthcare expenses via copayment or coinsurance while it handles everything else.
Considering health insurance policies differ from one provider to another, it is imperative that you understand how a deductible works and how it fits explicitly into your policy.
Some health insurance policies provide coverage for services like preventative care or checkups before you even meet your deductible. This is why you need to know what your plan offers before you seek healthcare services.
Examples
To get how deductible functions, here are a few examples.
If you recently purchased a health insurance policy that has a $500 deductible and you require healthcare services covered by your plan, which costs a total of $5,000. Your insurance company would foot the bill for those services but not before meeting your $500 deductible.
The process is spelled out below:
- Your deductible is an out of pocket cost, so you pay $500 to the healthcare provider
- Upon seeing you meet your deductible, your insurance policy pays the remaining balance, which is $4,500.
What Things Should I Know About My Yearly Deductible?
Purchasing a health insurance policy can be a daunting experience. Higher than expected costs or strange terminology can prove to be a barrier. To ensure this doesn't happen, there are a few things you have to know when searching for a health insurance plan.
Understanding these things will ensure you get the coverage that is best suited to you. Here are a few of the things you need to know about your yearly deductible.
How Much Do I Pay As My Deductible?
Understanding how much you have to pay before you purchase a health insurance policy is a good move. As a general rule of thumb, if the policy's premium is low, the deductible is most likely high.
To help you ascertain if you can afford a particular policy's deductible, you need to understand that you have to be able to pay your health insurance deductible the moment you seek covered healthcare services.
If you cannot afford it in one go or save for it, then that health insurance policy is not for you.
When Does My Deductible Roll Over?
Generally, most health insurance policies have their deductibles roll over in the first month of the year. However, some policies use another date. For instance, health insurance policies gotten via universities or schools might make use of the academic year.
The date your deductible rolls over is important as knowing it enables you to schedule your doctor visits and treatments before the new year and after you meet your deductible. Not paying attention to this date could mean you have to pay a bit more at the start of the year.
For instance, if your deductible is $2,000 and it takes until August to meet it, any healthcare service you have for the remainder of that year will require only your coinsurance or copay.
Should you, however, wait till the new year, you will need to pay your $2,000 deductible again. To maximize your deductible, you should schedule big-ticket procedures before the new year in an effort to save some money.
Doing this ensures you do not have to pay your deductible again.
Are There Items That Don't Count Towards My Deductible?
A lot of health insurance policies waive your deductible for healthcare services like emergency care. They could also do this for the emergency room charge incurred when you get admitted. Read up on your health insurance policy to know exactly what you get and ensure you benefit from it.
Do In-Network And Out-of-Network Care Have Different Deductibles?
Not every health insurance policy combines deductibles for out of network and in-network care. For those that have separate deductibles, you could end up paying a lot more if you meet your in-network deductible but visit a healthcare facility that counts as out of network.
To ensure this doesn't happen and you aren't left with a huge bill, check with your insurance service which healthcare providers are categorized as in-network and which are categorized as out of network.
Read up on your health insurance policy to know the rules and ask questions before scheduling a visit. You should also be aware that not every doctor operating out of the same clinic takes the same health insurance policy.
If you are on a group health insurance plan, find out if your deductible is combined or separated for every member.
Find Out How Possible It Is To Meet Your Health Insurance Deductible
When we buy health insurance, we usually do so, hoping that the plan pays for our healthcare expenses. However, if you discover that you rarely meet your deductible year after year, You might think a lower deductible policy would be better.
This might sound like a great idea considering you end up with lower out of pocket costs. Nevertheless, you should be careful, as lower deductible health insurance policies usually come with higher premiums, which could negate the savings you hoped to realize.
Before switching, ensure that you find out the entire cost spectrum. This means your premiums, coinsurance, copayments, and included benefits should be weighed.
How To Select The Appropriate Deductible Amount
With the information above, you should now understand what deductibles are and how they work. However, the question of selecting the appropriate deductible amount still needs answering.
How do you know to balance your financial situation and your healthcare needs to arrive at an appropriate deductible? To help you answer that question, here are a few things you will need to consider when comparing health insurance policies and their deductibles:
Budget
Your financial status has as much influence as your healthcare needs on the type of health insurance policy you buy. Health insurance, particularly the deductible and monthly premium, can be a massive financial commitment.
You would want to understand what you are getting into and how the plan could affect you financially before making a decision.
Required Coverage
The health insurance policy you select has to provide you with the best care ultimately. It doesn't matter if you see the doctor frequently or not. Your medical history has to be a major aspect of your decision process.
When weighing your choices, consider the expenses you would be responsible for and how they would look with various deductible levels.
