An insurance deductible, a form of cost-sharing with your insurer, is the amount of money you pay before the insurer starts covering the cost of your medical expenses. Your deductible amount varies depending on your insurance plan. You might pay anywhere from $500 to $3,000 or more for your deductible, depending on whether you pay insurance premiums (monthly cost) as an individual or family.
Your deductible resets every year, so each year you’ll need to repeat the process and pay out of pocket again before your health insurance covers your medical expenses.
You may still need to pay a copay (the amount you pay when you arrive at your doctor's office for covered services) or coinsurance (a percentage that you pay after you pay your deductible, typically about 20% or 30%) — this amount depends on the details of your plan.
Health insurance deductibles
The deductible works the same way with health insurance plans. Your insurance company doesn't pay for absolutely everything. You must pay for part of the costs of health care and your insurer pays the rest.
Whether you choose your plan on the Marketplace or through your employer, you must choose a deductible amount for your plan.
Let's discuss how this works. Let's say you take your two kids to an ear, nose, and throat doctor due to their seasonal allergies. The doctor's visit costs only $500. You must pay for the full amount of the doctor's visit because you haven't met your deductible of $3,000. (You've got $2,500 to go.)
Now, let's say the ENT doctor finds that both kids both need a septoplasty, which costs $10,000 total. You've already satisfied $500 of your deductible, so you'll pay $2,500 before your insurance company jumps in and pays the remaining $7,000.
The next time your family must pay for medical expenses, you only have to pay for coinsurance because you've already met the deductible.
You may not have to pay toward a deductible when you go in for preventive care or routine visits to a primary care doctor. You may have to pay for the entire cost of the visit, including your copay. Check with your insurance company to determine how exactly deductibles and copays work with this type of visit.
- Copay: You must pay a copay with no or low deductible health insurance. You may not need to pay a copay for ACA-compliant health plans.
- Out-of-pocket maximum: Your out-of-pocket maximum cannot go over a set amount each year. Once it does, your insurance company pays for 100% of the costs. Out-of-pocket maximums for Affordable Care Act plans can vary but cannot go over $8,550 for individuals and $17,100 for families in 2021.
- Premium: The price you pay per month to have health insurance, whether you use it or not.
No-deductible health insurance
Higher deductibles usually mean you'll pay less for health insurance premiums and vice versa. However, what about no deductible health insurance? You might think that no deductible health insurance could offer a great benefit because you won't pay a deductible at all.
If you would rather not make required upfront payments or meet a minimum balance for health care, you may want to choose no-deductible health insurance. With no-deductible health insurance, your health insurance company makes payments upfront, which means it pays out early for doctor visits and other events.
However, in order for your insurer to make a profit, you may pay a higher monthly premium. In contrast, you'll pay a lower monthly premium for a high deductible plan.
Anytime you increase the benefit in one area of a health plan, you can expect it to change another area of your health plan.
In general, you can more easily predict your health expenses with a no- or low-deductible health insurance policy, despite the fact that you will pay higher premiums.
A low- or no-deductible plan makes sense for you if you:
- Become pregnant, plan to become pregnant, or have small children.
- Have a chronic condition.
- Must see a doctor regularly.
- Take expensive prescription drugs.
- Have a high risk of injury due to your interests.
Medicare deductibles
Your deductible refers to what you'll pay for your prescriptions and healthcare before Original Medicare, other insurance, or your prescription drug plan pays for your healthcare expenses. In 2021, you pay $203 for your Part B deductible. After you meet your deductible for the year, you typically pay 20% of the Medicare-approved amount. Your deductible will reset each year and the dollar amount may be subject to change.
You have to pay a certain amount out of pocket before Medicare will provide you with coverage for additional costs. Almost any item or service that Part B covers will count toward your deductible.
Coinsurance after deductible
Your payments may not stop after you pay toward your deductible. Coinsurance refers to the amount you'll pay related to the percentage of costs of a covered health care service after you pay your deductible. Let's say your coinsurance amount is 20%. In this case, you pay 20% of the full costs of a covered service after you pay your deductible amount.
Let's say you have a $3,000 deductible and 20% coinsurance. Let's also say you owe $5,000 toward a health procedure. First, you pay your deductible amount of $1,000. Next, you pay the coinsurance amount — $1,000, or 20% of $5,000.
Once you reach your policy’s maximum out-of-pocket expense limit, the insurer will cover all health expenses throughout the remainder of the year.
What if you can't pay your deductible?
Can't afford your premiums or deductible? You can get supplemental insurance coverage or use a few other tactics to pay for your insurance.
Supplemental insurance covers costs above and beyond standard health insurance policies and covers the following:
- Critical illness and cancer insurance cover additional costs related to expensive medical conditions such as cancer or stroke. It can cover long- or short-term illnesses.
- Accident insurance involves a lump-sum cash benefit related to ongoing care after an accident.
- Hospital insurance can take care of your deductibles, prescriptions, and other costs.
- Disability insurance can cover your income if you become too sick or injured to work.
- Medicare Supplement: Americans over 65 and those with disabilities can get a Medicare Supplement plan (also called Medigap). Medigap covers copays, coinsurance, and deductibles.
You may want to use emergency savings to pay your bills, negotiate a payment plan with your health care provider, look for cheaper health care options, or check into employee assistance charity programs through your employer.
Compare plans before you buy
Take a look at a few plans before you choose the right insurance plan for you. Insurance companies all charge different amounts, so get a variety of quotes before you choose the right one for you or your family. Try to get at least three quotes.
The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.
