What Is a Deductible?
A deductible is the amount you have to pay out-of-pocket before the insurance company starts paying your covered health care expenses. For example, if your deductible is $250, you have to spend $250 for doctors' visits or for prescription medications before your health insurance company will start to pay.
A health insurance deductible works in a similar way to auto insurance. For example, if you get into a fender bender on the way to work, you have to pay your deductible amount and then your insurance company pays the rest. Health insurance is the same way. Deductibles span a one-year time period, so during those twelve months you’ll only have to pay the deductible once per year. Be sure to check your plan for specific coverage details.
Out-of-pocket costs are those health-care expenses you pay that are not reimbursed by your health insurance company. Some common out-of-pocket costs include your deductible, co-pay, and co-insurance. Your health plan will "cap" your out-of-pocket expenses, which means that once you reach the maximum out-of-pocket costs for your plan, your health plan takes over and provides coverage. Generally speaking, your out-of-pocket expenses are applied toward your deductible.
Meeting Your Deductible
After you meet your deductible, you may still pay either a co-pay and/or co-insurance amounts when you receive medical services or prescription drugs. Review your plan documents for specific details on your plan’s out-of-pocket expenses and deductibles.
High Deductible Health Plans
A high deductible health plan (HDHP) is a health insurance plan that requires you to pay a specific amount of money before the HDHP begins coverage. High deductible amounts range from a minimum of $1,200 for individuals to $2,400 or higher for family coverage. With a HDHP, you will typically have lower premiums. Because your deductible is higher, you'll have greater out-of-pocket expenses (what you must pay) before your deductible is met and the health plan starts to cover your health care.
Those enrolled in a HDHP may be eligible for a Health Savings Account (HSA). With an HSA, you control how the money is spent and you keep any interest and investment earnings from the account. Unlike a Flexible Spending Account (FSA), you don’t lose the money in your HSA at the end of the year. You can keep saving your money in the HSA year after year even into retirement. Click here for more information on HSAs.