What Is a Health Insurance Deductible?
Health insurance coverage generally doesn’t start paying until you spend some of your own money. This is the world of deductibles.
Getting health insurance isn’t just a matter of paying your monthly premium. There are other out-of-pocket costs that come with health insurance, including your deductible.
A deductible is the amount you’ll spend on medical services before your insurance plan begins to pay for your care. Once you meet your deductible, your insurance company will start to cover your services, at that point you’ll still be responsible for whatever copayments your plan has. You’ll need to take the cost of premiums and deductibles into account when choosing health insurance, because both will dictate how much you ultimately will spend.
How health insurance deductibles work
Once you’re enrolled in a health insurance plan, you’re required to pay a monthly premium, for your coverage. Unfortunately, that fee does not cover the entire cost of your services. Most health plans in fact include a deductible that needs to be reached before the insurer will cover the services.
Let’s say you have a health insurance plan with a $2,000 deductible. This means you’ll pay for your first $2,000 in medical costs in full. Once you meet that deductible by spending $2,000 on medical care, your insurance company will start to pay for your services. At this point you may still need to contribute a portion via a copayment. Once you pay your deductible, you’ll no longer have to pay for your medical services in their entirety.
Choosing the right deductible
Generally speaking, insurance plans with lower monthly premiums come with higher deductibles, while plans with higher premiums come with lower deductibles. When choosing which type of insurance plan you will purchase, think about not just how much you tend to spend, but how much risk you’re willing to take. If you have medical bills that come in higher than expected, you would be responsible for a large deductible and you should be prepared to cover this large expense.
Say you’re comparing two different plans. The first has a monthly premium of $200 with a $12,000 deductible, the second has a $500 monthly premium with a $1,000 deductible. If your health is generally good, you may be inclined to go with the first option. This way, if you only need, say, a single $400 doctor visit during the year, you’ll spend just $2,400 on premiums plus another $400 toward your deductible for a total of $2,800.
What happens if you get injured and require a $12,000 medical procedure? Suddenly, you’re far better off with the second plan, because while you will spend $6,000 over the course of the year in premium costs, you’ll only need to cover a $1,000 deductible, bringing your total to $7,000. In the first scenario, you’d be on the hook for your entire $12,000 deductible plus your premium costs.
That said, keep in mind that certain preventative services may be covered by your health plan even before you meet your deductible. It’s important to review the specifics of each plan you’re looking at before making a decision, and to choose the option that offers the most coverage with the least amount of risk and cost.