Understanding a Deductible

Understanding health insurance deductibles are significant in selecting the best coverage for you and/or your family. Many people narrow their options by monthly premium… focusing on how much they have to pay each month to have their health insurance policy. However, understanding the deductible is equally important. In this blog post, we are breaking down the term “deductible” and how it applies to your health insurance coverage.

Simply put, the deductible is the amount you pay for covered health care services before your insurance plan starts to pay. This amount that you pay is not to be confused with your health insurance monthly premium. The amount you will pay towards your deductible before your insurance plan starts to pay is related to the covered service(s). For example, if your insurance plan has a $5,000 deductible – you will have to pay the first $5,000 of covered services yourself; in addition to continuing payment of your monthly premium. Keep in mind, your insurance plan may offer certain “free” preventative services that might be covered at 100% or with a co-payment prior to meeting the requirements of your deductible.

Once you have met your deductible requirements, your insurance will begin to pay the costs for additional covered services you receive, but how much they pay will vary depending on your insurance plan. See, after you have paid your deductible, you may still be responsible for a copayment or coinsurance depending on the service, coverage, and limitations on your plan. Say you have met your deductible and you end up needing to now visit a specialist, your cost may be a $75 co-payment of which you pay to the specialist’s office, and then your insurance will pick up the tab for the remaining amounts that may be billed by the specialist’s office for your visit. Prior to meeting your deductible requirements, that same visit to a specialist’s office may have been required to be paid by you. It may have cost you about $350 and it would have then been applied to your deductible.

Now, let’s say you choose a plan that offers coverage that will pay for certain services, like a primary care physician visit before you have met your deductible… in this case, you may only have to pay a co-payment or co-insurance for your visit even though you have not met your deductible yet. For most people, this type of plan is ideal. They are able to visit their primary care physician at a fixed rate such as $50 before having to pay their deductible which may be $2,500, $5,000, or more. It’s important to understand that some plans have separate deductibles for certain services, like prescription drugs. This means that you may have to meet a separate deductible for prescription drugs before your insurance picks up the tab. In this circumstance, some plans do offer certain generic drugs that may be offered with a co-payment prior to you meeting the requirements of the deductible, sort of like how you can see your primary care physician with a co-payment prior to paying your deductible.

So how does the deductible effect your monthly cost? Well, generally, plans with lower monthly premiums have higher deductibles and plans with higher monthly premiums usually have lower deductibles. Before you make the decision to go with a lower monthly premium and a higher deductible it is important to consider your total out-of-pocket costs.

Let’s take a look at the costs you can plan to pay…

  • Each month you will pay a monthly bill (premium) to your insurance company – even if you don’t receive any medical services that month.
  • When you receive medical services, you will pay out-of-pocket costs which may include the deductible amount, a co-payment, co-insurance, etc. – all depending on your plan, requirements, and covered services.

Conclusively, choosing the best plan depends on how often you plan to receive medical services. If you have regular medical visits, you may spend less money overall with a plan that has a higher monthly premium and a lower deductible. However, if you plan to only visit the doctor for preventative care and maybe a cold here or there, you might be better off with a plan with a lower monthly premium and a higher deductible.

Still aren’t sure what the best choice is for you? Give us a call!

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Reference:

Healthcare.gov (2018). Your total costs for health care: Premium, deductible, and out-of-pocket costs. Retrieved 2018, from https://www.healthcare.gov/choose-a-plan/your-total-costs/