Health insurance can be confusing. In order to compare different health plans and get the best plan for you and your family, you must understand a lot of complex terminology. There are premiums, HMOs, PPOs, allowed amounts, and much more in any health insurance glossary.
One of the often misunderstood health insurance essentials is the deductible. In this post, we’ll cover the deductible by answering 10 frequently asked questions associated with this insurance keystone.
What is a deductible?
Your deductible is the annual fixed amount that you must pay for the covered health care services you use before your insurance plan starts to pay, according to HealthCare.gov.
For example, if your deductible is $1,000, you must pay for the first $1,000 of services you use during the year. After you have spent enough to reach your deductible, your insurance company will start paying for your health care.
Why do I have to pay a deductible if I pay the premium?
The premium is the amount you pay monthly or annually to have health insurance. Nerdwallet compares health insurance premiums to a gym membership: “Like a gym membership, you pay the premium each month even if you don’t use it, or you lose coverage.”
In contrast, the deductible is the amount of health care services you have to pay for on your own, before your insurance policy begins to pay for these services.
In general, plans with higher premiums may have lower deductibles and other out-of-pocket costs such as copays and coinsurance.
Will I still have to pay for health care services after I meet my deductible?
It all depends on your plan. Many policies require you to continue to pay something toward the health care services you use, even after you meet your deductible.
Copays and coinsurance are two of the most common ways your plan may require you to continue to share the cost of your health care after you meet your deductible.
Are there any services that health insurers cover “100 percent” (at no cost to me) before I meet my deductible?
Many plans cover the entire cost of checkups, wellness visits, and disease management programs without requiring you to meet your deductible first.
The Affordable Care Act requires most health plans to cover a list of preventive services, such as blood pressure and cholesterol screening, at no cost to you. The insurance company has to cover 100 percent of the costs, whether or not you have met your deductible.
Healthcare.gov has detailed information about these “no-cost” preventive services.
The best way to make sure you know which preventive services are “100 percent covered,” regardless of the status of the deductible, is to read the plan details. The rules about which plans must cover preventive services at no cost to consumers have been changing as the result of recent actions by the federal government.
What is the difference between a deductible and a copay?
According to healthcare.gov, a copay is a fixed amount ($20, for example) that you pay for a health care service that your policy covers, even after you have met your deductible.
What is the difference between a deductible and coinsurance?
Coinsurance is the percentage of health care costs that you are responsible for after you’ve paid your deductible. For example, a plan may pay 80 percent of your medical bill while you cover the other 20 percent, after the deductible is met.
Healthcare.gov gives helpful examples of how coinsurance works.
What is the difference between a deductible and out-of-pocket costs?
Out-of-pocket costs are what you pay for “out of your own pocket” for the specific health care services you use during the year.
Out-of-pocket costs do not include your monthly or annual insurance premium. According to healthcare.gov, they do include deductibles, copayments, and coinsurance.
What is an out-of-pocket maximum?
Health insurance plans typically have a specified annual out-of-pocket maximum, or limit. This limit is the most you could have to pay for covered health care services during the plan year. After you spend up to this limit “out of your own pocket” on deductibles, copays, and coinsurance, the health plan pays 100 percent of the rest of the costs for the covered health care services you needed.
For the 2020 plan year, the out-of-pocket limits for plans offered on the Affordable Care Act marketplaces are $8,200 for an individual plan and $16,400 for a family plan.
Healthcare.gov has a good example of how the out-of-pocket maximum works to limit what you are responsible for paying if your medical costs for the year are high because an accident, illness, or other health condition.
Do health savings accounts (HSAs) have deductibles?
Yes, all HSAs must have deductibles. The Internal Revenue Service and federal law determine the minimum deductible health plans can offer and still qualify policyholders to have an HSA.
Does the deductible count toward my premium?
No, and premiums don’t count toward your deductible, either.
Have questions about health insurance? Contact your provider, or read more from Healthy Me PA to find out what questions to ask about your company’s insurance policy and learn some surprising services that could be covered by your health insurance provider.
This blog has been updated on October 1, 2019