Health Insurance 101: What Is a Deductible?

Navigating the world of health insurance isn’t always easy. You know that health insurance can help you afford preventative care and treatment. However, signing up for plans and understanding your payments can be confusing. You’ll see lots of words that you might not recognize—like deductible. What in the world is a deductible?

What is a health insurance deductible?

A deductible is the amount you pay for healthcare services before your insurance plan covers the balance. When choosing an insurance plan, you will often see a range of deductibles. One plan might offer a $500 deductible, another a $1,000 deductible, and another a $2,000 deductible.

For example, if you have a $1,000 deductible, it means you’ll pay for the first $1,000 of covered care yourself—with some exceptions (more on this later). After you have paid at least $1,000 in one benefit year, your insurance will start covering those costs. You’ll only need to pay your copay or coinsurance or if you go over your max reimbursement for any services after that. (Copays and coinsurances are usually either a set fee or a percentage of the total cost of the service.)

Here’s the exception: Whether you have reached your deductible or not, it’s possible that your insurance will often fully cover specific items. You would need to call to clarify what is covered or look at your eligibility of benefits table. These payments may not count toward your deductible. Plans with a higher deductible are often less expensive in other areas (copays, prescription costs, etc.).

What is covered before you reach a deductible?

Your insurance plan will likely cover some basic care services. This can help you stay healthy, avoid illness, or catch certain issues before they progress to a more serious (and expensive) problem. As a result, your insurance plan may fully cover the following items (i.e., they are likely free to you):

• Wellness visits

• Annual dental cleanings

• Cancer screenings like mammograms

Plus, you may also be able to get certain services offered at a set price or percentage of the cost, even if you haven’t hit your deductible yet. This includes office visits, blood work, urgent care visits, medications, some dental work, and more. Again, this encourages you to treat simple problems before they become a more serious issue.

Now, a visit to the doctor may cost you a set fee. However, you may need to pay for additional services that happen at the doctor’s office, like:

• X-ray

• MRI

• Infusion therapy

Many plans do not cover these services before reaching your deductible. You would pay for the service, and that cost would push you toward reaching your deductible.

Choosing an insurance plan

Many young or healthy individuals don’t reach their deductibles at all. That’s because they’re primarily getting check-ups and preventative care. They are able to benefit from many of the services that insurance plans already offer at a low cost.

However, deductibles can be very helpful for people with high healthcare costs, such as:

• Women during pregnancy and childbirth

• People managing chronic illnesses

• Cancer patients

• People undergoing major surgeries

• People getting treatment and aftercare from a serious accident

Individuals in these groups might opt for an insurance plan with a lower deductible. In other words, they will need to spend less of their own money before they can get financial help from their insurance. This may help ease the burden of paying for treatments. However, these plans usually have higher premiums, which are the monthly fees that you pay for your plan.

On the other hand, some people who don’t anticipate high healthcare costs might choose plans with higher deductibles. This is somewhat of a calculated risk because they’ll have a lot of expenses if an accident occurs or a serious illness develops. However, many individuals or families decide it’s worth it due to the lower monthly premiums (compared to high-premium, low-deductible plans).

Choosing how much of a deductible you want to pay is a personal choice for you (and your family). You might decide that you’ll benefit from a low deductible one year, but a high deductible the next, if you know your health needs are changing. Talk to a representative of your insurance plan for more details.