How Do Health Insurance Deductibles Work?
Posted on Jan 31, 2017
Before you purchase a health insurance policy, it’s essential that you learn the basics and get an understanding of this type of insurance so you know how it works. This includes your deductible.
The deductible on your health insurance policy is different than your premiums, co-pays and coinsurance. In a nutshell, your deductible is the amount of money you need to pay for your health care annually before your provider will begin paying. This usually includes things like blood tests, surgical procedures and hospitalizations.
As an example, if you have a deductible on your health insurance plan of $2,000, until you reach this amount, you’ll be required to pay all your medical bills out-of-pocket. Once you reach this amount, your insurance policy kicks in and you’re only responsible for the coinsurance and co-pay amounts. The insurance provider takes care of the rest. Your deductible generally ‘restarts’ itself each policy year.
Deductibles are put in place typically to keep your premiums low and reduce unnecessary visits to the doctor and the number of small claims. When people have deductibles on their health plans, generally speaking they are less likely to visit their doctor for small issues like a cough, runny nose, bruise or bump.
Deductibles and Preventive Care
Not all preventive care will require you to pay into your deductible. For instance, common services like immunizations, annual physical exams, OB/GYN visits and well-care child visits are usually NOT subject to your deductible. The reason behind this is likely to encourage you to protect your health by being proactive since early detection and prevention are key to keeping you healthy and lowering the costs of health care in the long run.
If your health insurance policy has a coinsurance requirement, you will be responsible for covering a certain percentage of your medical bill. For instance, many insurance providers will cover 80 to 90 percent of a medical claim which leaves you to pay the other 10 to 20 percent. Additionally, this is only after your deductible has been met.
When you have a lower premium to pay each month, chances are you have a higher deductible. This allows you to pay smaller amounts each month in premiums. However, if you have a low deductible, you will likely pay out more each month in premiums.
Choosing the Right Deductible
There are two main types of deductible plans:
- High Deductible Plan
- Low Deductible Plan
Deciding between a high or low deductible is a personal decision and really depends on how often you visit the doctor each year and how often you use your insurance. If you hardly ever go to the doctor’s office, you might wish to get a high-deductible plan so your monthly expenses will be lower. It’s important to remember that if you do choose a high-deductible plan, you will have medical expenses up front that you will have to pay, so it might be wise to budget some money for this purpose.
If you have children or plan on going to the doctor more often, a lower deductible plan might be a good choice. This is also a good choice if you have a medical condition that is chronic. When you have a high-deductible plan, visits like check-ups, well visits and emergency room visits can add up very quickly.
When deciding on health insurance, it’s a good idea to know upfront what your insurance provider covers and what will be your responsibility. This includes your deductible. Your individual needs will determine whether you want a high or low deductible and what you will ultimately end up paying in monthly premiums. An easy way to pay out lower monthly premiums is to increase your deductible.
