What Is a Health Insurance Deductible?
Key takeaways:
A health insurance deductible is the amount of money you must pay before the insurer starts paying for covered services.
Some policies have a separate deductible for prescription drug coverage.
All Affordable Care Act (ACA) plans pay the entire cost of preventive services, even if you haven’t yet met your deductible.
Insurance companies share the cost of your medical care in various ways. One common method is by including a deductible in your health insurance plan.
To manage your healthcare costs, it’s important to understand what deductibles are and how they figure in. Here’s an overview to get you started.
What is a deductible?
A deductible is the amount that your insurer deducts from your annual benefit right off the top. The company doesn’t pay any claims until you’ve spent that amount out of pocket. After that, the insurer will cover your expenses for the rest of the year, according to the terms of your policy.
Prescription Savings Are Just the Beginning
See what other benefits you qualify for—from cashback cards to cheaper insurance.
How deductibles work
As your plan year begins, you pay 100% of your healthcare bills to your healthcare provider or hospital until your out-of-pocket total equals, or “meets,” your deductible. The insurer then covers your claims through the end of the plan year, though you will share those costs via copayments or coinsurance. The deductible resets once a year. For Affordable Care Act (ACA) plans, the reset date is January 1.
Do all healthcare insurance policies have deductibles?
Most do. You should expect deductibles on these policies:
Medicare and Medicare Advantage
Medicaid
Qualified health plans (QHPs), whether from employers or the health insurance marketplace
The higher the deductible, the more you’ll have to pay out of pocket before coverage starts. As a result, your policy is less likely to deliver you significant value. So, high-deductible policies have to sell for lower monthly premiums.
There are also major medical plans with an upfront cost of $0, called no-deductible plans. The good news is that the insurance company begins paying your claims right away. The bad news is that you pay higher monthly premiums and still share costs through copays and coinsurance.
VA healthcare and limited medical insurance plans do not have deductibles.
Read more like this
Explore these related articles, suggested for readers like you.
What are the different types of deductibles in health insurance?
You’ll see various types of deductibles when looking at your policy or comparing plans. Here are some of the most common:
Comprehensive deductible: This means the deductible applies to all medical services. The only exception is preventive health benefits offered by a QHP.
Noncomprehensive deductible: The deductible does not apply to certain medical services, such as physicals and routine checkups. The plan covers those claims, whether or not you’ve met your deductible.
In-network and out-of-network deductibles: These match up with your insurance plan’s network of healthcare providers. For care you get outside of the plan’s network, you incur higher deductibles, copays, and coinsurance amounts.
Prescription drug deductible: Some insurance plans have a separate deductible for their prescription drugs. The deductible may or may not apply to all the drugs in a plan’s formulary.
Individual deductible: This is the amount an insured person must spend before their plan starts to pay healthcare claims.
Aggregate deductible: Family insurance plans can have this type of collective deductible. All money paid toward family members’ individual expenses is credited toward the family deductible. The insurer pays no claims for any family member until the total out-of-pocket spending equals the deductible amount.
Embedded deductible: With this type of family deductible, each family member has an individual deductible, while the group also has a collective deductible. Each person gets their benefits as soon as they meet their individual deductible, no matter what the family total is. Once the family deductible has been met, the insurer pays claims for all members.
How much are deductibles?
Deductible amounts vary by plan, but here are some numbers to consider:
For QHPs, the 2022 maximum deductible amounts are $8,700 per individual and $17,100 per family.
Among employer-based health insurance plans in the U.S., the average deductible amount for 2020 was $1,945 per individual and $3,722 per family.
In the health insurance marketplace, the 2021 median individual deductible for bronze-level plans was $6,992. For silver plans, the median figure was $4,879; for gold plans, it was $1,533.
Is it better to have a high or low deductible?
The best deductible level for you depends on your needs and budget. In general, a high-deductible health plan (HDHP) has the advantage of lower monthly premiums. However, surprise hospital trips or a diagnosis requiring expensive treatment could leave you in debt if you don’t have the cash to pay that high deductible.
To help you lessen this risk, some employer-based HDHPs come with health savings accounts (HSAs). HSAs contain pretax dollars contributed by both you and your employer. Earmarked for qualified medical expenses, those tax-free dollars will go a bit further.
But if you fear sudden strains on your budget, managing your expenses with a low-deductible plan may suit you better. You’ll pay a higher monthly premium, but you may find you save money overall. That’s especially true if you already know you’re likely to require frequent healthcare services.
Do my monthly health insurance payments go toward my deductible?
No. Your monthly payments are your health insurance premiums. They are similar to a subscription payment, keeping your account active. You pay your deductible in addition to your premiums.
How different factors work with your deductible
Your deductible is one part of your cost-sharing obligation. After you’ve met it, you still have various out-of-pocket expenses related to your deductible.
The three main expense types are:
Insurance premiums: As mentioned above, higher deductibles are linked to lower premiums. Similarly, lower deductibles typically lead to higher monthly premiums.
Copays and coinsurance: These cost-sharing charges kick in after you meet your deductible. Copays are flat fees for covered health services, such as $30 for a doctor’s visit. Coinsurance is the percentage of the medical bill you’re responsible for paying. For example, with 20% coinsurance, you’d owe $20 for a $100 doctor’s office visit. Your plan documents will have specific information on when these charges apply.
Out-of-pocket maximum: This figure represents the annual limit of what you’ll owe for covered healthcare treatments and services. Beyond that amount, the insurer pays for 100% of the covered services. Deductibles count toward your out-of-pocket maximum, as do all payments you make for covered health services. In tandem with your deductible, your progress toward your out-of-pocket maximum resets to $0 when the new plan year starts.
Does a job change affect your deductible?
When you switch jobs, the effect on your deductible depends on the source of your insurance coverage. If you have an employer-based plan, any deductible contributions you’ve made will not carry over to the new employer’s plan. But your deductible contributions are unaffected if you purchased your policy:
Through the marketplace
Direct from the insurer
Through an insurance agent or broker
When can your deductible be waived?
Certain healthcare services are excluded from the deductible. That means you can receive the plan benefit at no cost from a network provider, whether or not you’ve met your deductible.
All ACA plans exclude from the deductible a group of preventive benefits such as screenings, immunizations, and preventive medications like statins.
Your particular policy will list the benefits that don’t require a deductible. Some common examples are:
Primary care visits and checkups
Generic and brand-name prescription drugs
Specialist visits
Mental or behavioral outpatient visits
What can you do if you can’t afford your deductible?
One way to ease the burden of deductibles is to buy supplemental health insurance. This type of plan pays you a lump sum for a specified medical event. The cash can help you pay out-of-pocket healthcare expenses. In considering this option, compare the plan’s premium cost to your deductible amount and your available savings. Also assess the likelihood that you’ll need medical services.
If you decide to pay by credit card, try to use one that offers an introductory 0% annual percentage rate (APR). Some cards allow you to set up low-APR installment plans to pay off large purchases. Call your credit card’s customer service department to ask about your options.
Can GoodRx purchases be credited toward your deductible?
If you use a GoodRx coupon to purchase a drug covered by your plan, you can submit your receipt to your insurance company, requesting that they count the expense toward your deductible. Ask your insurer what other information you should submit with your claim.
The bottom line
Deductibles are a cost-sharing feature of almost every health insurance plan. Plans may impose different deductibles for different treatments or services. For example, ACA-compliant plans charge no deductible for preventive care services. If your plan has a high deductible, adding a health savings account or supplemental insurance may help you manage the expense over time.
Why trust our experts?
References
American Express. (n.d.). Pay your way with Pay It Plan It.
Blue Cross Blue Shield Minnesota. (2019). High value platinum no deductible plan 559.
Centers for Medicare & Medicaid Services Center for Consumer Information & Insurance Oversight. (2020). Plan year 2021 qualified health plan choice and premiums in healthcare.gov states.
Centers for Medicare & Medicaid Services Center for Consumer Information & Insurance Oversight. (n.d.). Qualified health plan certification.
The Commonwealth Fund. (2016). How deductible exclusions in marketplace plans improve access to many health care services.
Georgetown University Health Policy Institute Center of Health Insurance Reforms. (2014). Embedded deductibles: source of consumer confusion. CHIRblog.
Healthcare.gov. (n.d.). Coinsurance.
Healthcare.gov. (n.d.). Copayment.
Healthcare.gov. (n.d.). Deductible.
Healthcare.gov. (n.d.). Health savings account (HSA).
Healthcare.gov. (n.d.). Out-of-pocket maximum/limit.
Healthcare.gov. (n.d.). Preventive health services.
Healthcare.gov. (2021). Last chance: act by Dec. 15 for coverage that starts Jan. 1. Healthcare.gov blog.
Healthinsurance.org. (n.d.). Supplemental insurance.
Kaiser Family Foundation. (2019). 2019 employer health benefits survey. Section 9: prescription drug benefits.
U.S. Department of Veterans Affairs. (2020). Eligibility for VA health care.
U.S. Office of Personnel Management. (n.d.). FastFacts high deductible health plans.
United Healthcare. (n.d.). How does a fixed indemnity plan work?
