Mark Luigi Dacumos
What Is a Health Insurance Deductible?
Insurance is a safety net that helps you pay for medical costs when needed. Before insurance steps in to cover those costs, you will have to pay a certain amount out of your own pocket, which is the deductible.
For example, let’s say you break your leg while playing a sport, and you have a $1,000 deductible. Before your insurance kicks in to pay for the costs to repair your leg, you will have to fork over $1,000 to your medical provider.
It’s worth noting that your deductible amount can be reached in one visit, or it can take several months. It all depends on your situation and what medical needs arise. You have to “meet” this deductible to kickstart your insurance, which can seem like a pain. Luckily, the deductible resets to zero once your new policy period begins, which is usually after a year.
Having a high deductible may seem counterproductive, but it does help with reducing your monthly premium. Keep this in mind when determining your deductible amount, especially if you’re in good health.
Now that you know the basics of a health insurance deductible, let’s take a quick look at some other costs involved.
Health Insurance Costs Besides Your Deductible
Premium
As long as you have a health insurance plan, you’ll have a monthly payment, which is the premium. If you’re lucky enough never to need to use your insurance, the monthly premium will be your only cost. Again, the deductible will only have to be paid if you need medical care and solicit your insurance’s help.
As expected, your premium will be higher if you have more people on your plan. If you’re married, for example, you may pay more per month than a single person. And if you have kids added to your plan, you can expect your premium to go up.
Copay
Just because you pay your premium and deductible doesn’t mean that you’re in the clear if you have a health insurance claim. You may have a copayment (copay), which is part of the claim that will come out of your pocket.
Some copays are calculated as a percentage of the cost, while others are fixed. For example, you may have a $25 copay on all doctor’s office visits. In other words, you’ll have to pay $25 each time you see your doctor. Or, for instance, your copay may be 10 percent of the cost of any visit. So if the visit costs $100, you’d pay $10 to your doctor.
Coinsurance
As if it couldn’t get any more layered or complicated, you may also have coinsurance. This is what you pay past any limit set by your health insurance company. Think of it as a remainder of the costs that you must cover.
After your deductible is met, coinsurance may kick in if your insurance company doesn’t pay your entire bill. They may pay only 80 percent of your expenses, for example, leaving you with 20 percent coinsurance.
Out-of-Pocket Maximum
This is the maximum you will have to pay during a policy period. Once you reach it, your insurance company will be responsible for the rest of the expenses. Your out-of-pocket maximum includes:
- Deductible
- Copay
- Coinsurance
It does not include your premium or any expenses for providers you use outside of your network.
