What Is a Health Insurance Deductible?

A deductible is one of the several costs in your health plan that you should consider. It is the amount that you must pay before your insurance begins to cover costs for covered services. This deductible resets at the beginning of each benefit year, usually January 1st. The amount of the deductible, the amount you must pay, varies per plan. As a general rule, the higher the monthly plan premium, the lower the deductible.

Once your deductible is paid, your health insurance will pay for covered services. There is often an associated co-pay or co-insurance you pay, but your insurance will cover the majority of the cost. Some plans have separate deductibles for certain services. A common example of this is prescription drugs. Preventative care and some disease management programs are covered entirely before your deductible is met.

Plans offered by the health insurance marketplace have a limit on total out-of-pocket costs. Your deductible counts towards this out-of-pocket limit.  Plans sold elsewhere may not have the same limits, or any.

How Do Health Insurance Deductibles Work?

When you enroll in a plan, the plan will have a set deductible. You are required to pay out-of-pocket for most covered services until the deductible is met. For example, if your annual deductible is $1,000, you must pay for most costs until you have paid $1,000. Once you have paid $1,000 total out-of-pocket, your insurance provider will start paying. In the case that you get care totaling more than $1,000, you will pay up to deductible, and then the insurance will kick in.

After the deductible is met, your medical costs are covered. However, most services will require a co-pay or co-insurance. The co-pays and co-insurances will also count towards your out-of-pocket maximum. At the beginning of the year, your deductible will reset. In the case of a $1,000 deductible, you will again be required to pay that amount before costs are covered.

Federal requirements mandate that preventative services be covered in full before the deductible is met.. Things like check-ups, some counseling, testing, and screenings are examples of covered services.

How Do Deductibles Differ?

Some plans may have more than one deductible. Some examples of this are:

• If you have family coverage. Each covered member of your family may have an individual deductible. This can sometimes even be alongside a family deductible total.
• Costs for prescription drugs may have their own deductible. This deductible is commonly smaller than your main deductible, but it is separate.
• Costs for out-of-network care. Sometimes plans will have a separate deductible for services received out-of-network. This deductible is commonly higher.

Deductibles also differ in costs. For example, some plans may offer a $1,500 deductible, while others may come with a $4,000 deductible. The amount of your deductible will often impact your monthly premium as well. Lower deductibles often mean higher premiums.

Another way deductibles differ are through first dollar coverage, or a policy that carries no deductible. Coverage begins on the first dollar claimed, and often also has no co-pays. These policies often have high premiums and limits to payout amounts.