What Is a Deductible?

A deductible is the amount of money you pay each year for healthcare before your insurance company starts to pay. Until you meet your deductible, you are responsible for paying for your doctor’s visits or treatments, with some exceptions. Once you reach your deductible, your insurance company starts paying your bills or splitting this cost with you. Your deductible can be high or low, depending on the type of plan you have. Your health plan’s deductible starts over each year, and the amount you owe may change annually.e60dc2a1-f33c-4a05-9b50-8e3e8e597629d7b8f0ba-261d-45b9-8963-a96fc285cb53
How Does a Deductible Work? How Does It Work? When you pick a health insurance plan, you will choose your deductible. This is the amount you pay before your insurance kicks in. For example: If you have a $2,000 deductible, you will have to pay $2,000 out of pocket before your insurance contributes to your bills. One exception to this rule is that your insurance company may cover certain services, like preventive treatments, without requiring you to meet your deductible.e60dc2a1-f33c-4a05-9b50-8e3e8e59762938a65c54-7c63-4cbb-80d5-ff91157bb40b Deductible amounts can vary a lot, depending on your plan. If your plan covers more than one person, you may have both an individual deductible (the amount one person has to meet) and a family deductible (the amount the whole family has to meet). You also may have a deductible for prescription drugs separate from your deductible for medical services.e60dc2a1-f33c-4a05-9b50-8e3e8e59762936e74075-e873-420f-a8ed-fd141b99776a
Will I Have to Pay Any Costs After Reaching My Deductible? What Costs Do I Pay? You may still have some costs after you meet your deductible. Premium Payments Premium payments are what you pay, usually monthly, to keep your health insurance active. You must pay your premium, whether or not you use any healthcare services. Premium amounts vary, depending on your plan, where you live, and your age. You will continue to pay your premium payments after you meet your plan’s deductible.e60dc2a1-f33c-4a05-9b50-8e3e8e597629f7721c22-2f83-4f6e-a4f3-f5a262ada9d3 Copays Many health insurance plans have copays. These are fixed payments you make each time you have a medical service done. For example, you might owe a $20 copay every time you have a doctor’s visit or get a prescription filled. Sometimes, copays go toward your deductible, but many times, they do not. Most often, you will have to pay copays for health services even after you reach your deductible. Copays usually count toward your out-of-pocket maximum.e60dc2a1-f33c-4a05-9b50-8e3e8e59762931b8bae5-38b2-4026-900e-0163f000b001 Coinsurance Coinsurance is the percentage of a medical bill that you pay after you reach your deductible. Many insurance plans offer an 80/20 coinsurance split. This means the insurance pays 80 percent of the bill, while you pay 20 percent.e60dc2a1-f33c-4a05-9b50-8e3e8e597629a2214785-8939-4a85-886f-98ab00cc2918 Out-of-Pocket Maximum Your out-of-pocket maximum is the most that you will pay for health services in a year. Once you reach this amount, your insurance company will pay 100 percent of your costs for the rest of the year. Your deductible counts toward your out-of-pocket maximum, so when you pay your deductible, you are closer to reaching your max. Premiums do not count toward your out-of-pocket maximum.e60dc2a1-f33c-4a05-9b50-8e3e8e597629a7bb6e82-a243-4c5b-b958-e63230dfdb98 Here’s an example of how your deductible, coinsurance, and out-of-pocket maximum work: Let’s say your health insurance plan has a $1,000 deductible and a $4,000 out-of-pocket maximum. You have surgery, and the bill is $10,000. You will pay $1,000 to reach your deductible. Then, you will split the remaining $3,000 with your insurance company (a coinsurance split) until you’ve reached your out-of-pocket maximum. Once you hit your $4,000 max, your insurance company will cover the rest.e60dc2a1-f33c-4a05-9b50-8e3e8e59762905ffeac3-db97-49c9-952a-bc8060e2a4de
How Does a Deductible Differ for In-Network vs. Out-of-Network? In-Network vs. Out-of-Network Your deductible amount may depend on whether you use: In-Network Care You go to doctors or hospitals that work with your insurance. Out-of-Network Care You see providers that don’t work with your insurance. You may have a separate deductible for in-network and out-of-network services. If this is the case, your out-of-network deductible is usually higher.e60dc2a1-f33c-4a05-9b50-8e3e8e5976299213d246-0a69-4240-9028-3f3347265283
Is It Better to Choose a Low-Deductible or High-Deductible Plan? Low vs. High Deductible It depends on your budget and your health needs. High-deductible plans usually come with a lower monthly premium and a higher out-of-pocket maximum. On the other hand, low-deductible plans have higher premiums and lower out-of-pocket maximums.e60dc2a1-f33c-4a05-9b50-8e3e8e597629ebadb729-61ea-4fd5-9897-ad617d0ddb56 If you’re young and healthy, a high-deductible plan may be a better option. But if you have health concerns and want your coverage to kick in quickly, a low-deductible plan may be more preferable. Here are some factors to consider when choosing a deductible plan.e60dc2a1-f33c-4a05-9b50-8e3e8e5976292c67cc8d-cf5e-4594-8a2d-ed790f5382a7
What Is an Aggregate Deductible? Aggregate Deductible An aggregate deductible is one big deductible that your whole family has to meet together before your insurance covers costs. With an aggregate deductible, it doesn’t matter who spends what. It’s the combined bill that counts. Once the aggregate deductible is met, the plan covers the costs for all the family members.e60dc2a1-f33c-4a05-9b50-8e3e8e5976299358cb84-216b-46aa-bbe1-678501b46591
What Is an Embedded Deductible? Embedded Deductible With an embedded deductible plan, insurance will cover costs once: A single family member reaches their individual deductible or The family deductible is reached. Essentially, each family member has their own deductible within the family plan. If a single individual within the family reaches their deductible, the insurance company contributes to paying costs for just that person. Once the family deductible is met, the plan covers the costs for everyone.e60dc2a1-f33c-4a05-9b50-8e3e8e597629cfb83952-142b-431c-b98f-65a8a6da7caa
The Takeaway A deductible is the amount of money you pay each year before your insurance plan kicks in. Different plans have different deductible amounts. A high-deductible plan typically benefits someone who is young, in good health, or doesn’t need medical services often. A low-deductible plan may be best for a person who is older, has a chronic illness, or requires frequent doctor’s visits.
Resources We Trust Healthcare.gov: How to Pick a Health Insurance Plan Healthinsurance.org: What Is a Health Insurance Deductible? Kaiser Permanente: Glossary of Eligibility and Benefits Terms USA.gov: Health Insurance UCSF.org: Health Insurance Terms & Definitions