Health Insurance Deductible: How it Works?

With health insurance, a lot of terms are associated with it. The term "deductible" is one of these important terms linked with health insurance. Before buying health insurance, it is necessary to understand the deductible in health insurance. Let's find out everything you should know about deductible health insurance and how it works?

What is Health Insurance Deductible?

A Health insurance deductible is a fixed amount of money you are required to pay out of pocket before the insurance plan starts to pay. The deductible amount varies depending on your health insurance plan. In simple words, it is the proportion of medical and hospitalization expenses that an insured person has to pay before making an insurance claim. Once the full amount of deductible is paid, the insurance company will pay the insurance claim amount to you or directly to the hospital.

Deductibles renew every year. Deductible amounts range from hundreds to thousands of dollars. They can be high or low, it depends on the plan you choose. The deductible is compulsory for everyone aged 18 or above under their health insurance plan. It is not included in the premium. Rather, you have to pay the deductible besides the premium.

How Health Insurance Deductibles Work?

Every year, the deductible renew and starts over. When you buy health insurance, you are supposed to pay a monthly premium for one year. This monthly premium is different from the annual deductible. It is paid before the insurance company begins to cover the medical costs.

Let's consider an example if a patient has a $1,000 annual deductible and he has to undergo surgery that costs $3,000. The patient will pay the $1,000 out of his own pocket and the insurance company will pay the pending value of $2,000. This $2,000 will be covered under the patient's health insurance plan.

After the deductible is paid, the insurance company will cover all medical costs of the insured person. Deductible will automatically reset every new year. After the deductible is met, you usually have to pay the copayment or coinsurance for the covered services and the insurance company will pay the rest. Every health insurance plan has different deductibles, like individual coverage or family coverage.

Copayments and Coinsurance

Once you pay off the deductible, you will be responsible for copayment and coinsurance. Copayment and coinsurance are two different things.

Copayment or copay is a fixed amount you will pay for covered health care services such as doctor's visits, prescriptions. You have to pay the copayment after paying off your deductible.

On the other hand, coinsurance is the percentage of the bill of medical services that you'll pay after you have met your deductible.

Low Deductibles and High Deductibles Health Plans

Depending on the health insurance plans, there are separate deductibles for prescriptions or per family member. Sometimes, deductibles are paid off in one visit or often take many months to meet your deductibles.

Low deductible plans have a lower deductible and a higher monthly premium. A low deductible plan is good for the people who need regular medical care and do several visits to the doctor each year. This plan helps them to manage their out-of-pocket expenses easily by keeping upfront costs lower.

On the contrary, high deductible plans have high deductibles and a low upfront premium. This plan is best for people who are healthy, don't visit the doctor often, and expect few medical expenses. This plan is designed to provide coverage for medical expenses. With a high deductible plan, the member has to spend less per month on the premium. But, the member is responsible for paying 100% of out-of-pocket costs until the deductible is met.

Health Insurance Deductibles and Marketplace Plans

The plans offered by the marketplace are similar to the plans offered by insurers. The marketplace offers four insurance plans.

·Bronze Plan

·Silver Plan

·Gold Plan

·Platinum plan

The bronze plan has lower monthly premiums but higher annual deductibles. They cover 60% of health costs.

The silver plan has a higher monthly premium. This plan covers 70% of health expenses.

The gold plan tends to have lower annual deductibles and higher monthly premiums. They cover 80% of health costs.

The platinum plan has the lowest deductible and highest premium. Moreover, they have the highest coverage of 90%.

The Bottom Line

Deductibles are part of health insurance plans and compulsory to pay. If you are choosing a health care insurance plan, you have to consider the deductible, copayment, monthly premium, and coinsurance. If you are young and healthy, don't have dependents, it is good to go for a high-deductible health plan. But, you have to pay the bills out of your pocket.

If you have health problems, have multiple dependents and you have to visit the doctor often, consider the low deductible plan. With this plan, you will pay a high premium but low deductible, copayment, and coinsurance costs.