Deductibles can be such a confusing part of your health insurance plan. If you’ve been wondering how does a health insurance deductible work, I’m here to help you understand all the types you might be interested in before you make a decision about which one works best for you.
If you’re actually unsure what a deductible is, it’s the amount you need to pay out of your own pocket for health services before your insurance plan starts to pay for covered costs.
Now that I’ve gotten the basics out of the way, it’s time to get familiar with the most common types of deductibles in health insurance that can be a part of your plan.
Types Of Health Insurance Deductible
There are several different types of deductibles in health insurance. Which one you get depends on the insurance plan you’ll choose. After reading about these types (below), you’ll know more about what you need to pick next time you have to make a decision.
One thing to keep in mind is that a single health insurance plan can include more than one form of deductible. Ensure that you read what deductibles are included in yours, as well as the list of benefits and terms and conditions. If you need further help or information, consult with a specialist.
This comprehensive deductible applies to all of your medical coverages that are a part of your plan. When you meet a certain amount of your comprehensive deductibles, that’s the moment when your coinsurance starts being active. Each time you pay for different medical services and procedures, these amounts simply add up until they reach the comprehensive deductible in your health insurance plan.
Your deductible can be non-comprehensive, meaning that it will not apply to all medical treatments and coverages. In other words, there will be medical coverages excluded from your deductible, and the amounts you pay for those will not add up to the non-comprehensive deductible as a part of your health insurance plan.
To get all the information you need regarding the limitations, you have to get in touch with your insurance company and find out everything before choosing a health plan.
An annual medical insurance deductible refers to the fixed amount you pay each year as a part of your plan before the insurance starts paying for all or certain medical coverages.
Although the annual deductible is one of the most common choices for people, there are still those who opt for a per-episode deductible. It means you will have to pay a deductible each time you receive medical services while your health plan is active. With the annual deductible, you’re covered throughout the whole year.
The amount depends on the health insurance plan you’ll choose. For example, you might need to pay $500 every time that you receive medical care if that’s a part of your plan. This type is an option for people who are in an excellent health condition and prefer to pay only when they require medical treatment.
Individual And Family Deductibles
The individual and family deductibles also depend on your plan. If you have insurance that includes your family members, it can come with a family deductible as well. However, you can opt for individual deductibles, where all your family members have their own individual deductible.
Family deductibles can be embedded or aggregate (non-embedded).
The embedded type contains both individual and family deductibles and states that a family member doesn’t have to wait until they’ve reached the family deductible to get the benefits of the health insurance plan. The amount of your individual deductible is embedded into the family deductible, hence the name of this type.
The aggregate deductible states that your individual deductible is not embedded into the family deductible. In other words, you need to get to the amount of the family deductible before your health insurance plan starts covering costs.
In-Network And Out-Of-Network Deductibles
When you need medical services, you can turn to providers that are a part of the network of your insurance company or providers that are outside that network. The first type delivers medical coverage for providers that are inside the network, while the second one covers providers outside of the network.
Out-of-network deductibles can cost you more, so make sure to educate yourself on the providers that your insurance company works with before deciding whether to add this deductible to your plan.
To get a better picture of how they work, here’s a simple example:
If your health plan says your in-network deductible is $2,000, you will have to pay $2,000 to your in-network providers before you reap the benefits. If your out-of-network deductible is $2,500, you’ll have to pay $2,500 to out-of-network providers before your health plan starts covering your out-of-network care.
If you chose these types to be separate on the plan, once you’ve paid $2,000 for in-network deductible, none of that amount goes to your out-of-network deductible. However, there are plans where you can add the two types together, and then the amount you’ll pay towards the out-of-network deductible will also go towards the in-network deductible.
Prescription Drug Deductible
Another medical insurance deductible you can add to your plan is the prescription drug deductible. This means you will first have to pay for prescription drugs until you’ve met a specific deductible.
Once you’ve met the deductible, it will change to either coinsurance when you have to pay a certain percentage of the full cost (usually for prescriptions at higher tiers) or copay when you have to pay a flat amount (usually for prescription drugs at lower tiers).
A High-Deductible Health Plan vs. A Low-Deductible Health Plan
High-Deductible Health Plan
A high-deductible health plan (HDHP) is one that has a relatively high deductible. In other words, if you have an individual deductible, you’ll have to pay $1,400 or more towards it, while family deductibles start at $2,800.
You will have to reach this limit and meet the deductible before the insurance company starts covering your medical expenses. This is a plan that requires higher out-of-pocket expenses, including copayments, deductibles, and coinsurance. When it comes to the total out-of-pocket costs, they can’t exceed $6,900 for an individual and $13,800 for a family.
You can link your HDHP with a health savings account (HAS), meaning you can cover some medical costs using money that will not undergo federal tax. Also, the monthly premium for this plan is usually lower.
Low-Deductible Health Plan
Low-deductible health plans represent the complete opposite of HDHP. With this plan, you’ll have a higher monthly premium, but you’ll have a much lower deductible.
This means you’ll have to pay less before you meet your deductible, but you will not be able to get a health savings account. You also need to remember that the monthly premiums for this plan are higher, so be prepared for that.
LDHP is an excellent alternative for people who suffer from chronic illnesses and know they will need medical care more often throughout the year.
Health Insurance Deductible FAQs
Do You Have To Pay A Health Insurance Deductible Up Front?
A deductible is not something you pay to your insurance company when you decide on a health plan. You pay it to medical providers during several visits or a single one, depending on the amount you are charged for the medical service(s) delivered.
Now, the question still stands whether you have to pay it upfront. And this is not a simple ‘yes’ or ‘no’ answer. Some hospitals and providers will ask you to pay for a particular service upfront, while others will send you a bill after the procedure is done.
Back in the day, all patients paid their bills right after the doctor’s visit or received a bill a few weeks after surgery. A lot of hospitals still do this; however, there are certain providers that can ask for a portion of or the entire cost of the service upfront. The main reason why they started doing this is because many patients never paid their bills.
Do You Have To Pay A Deductible For Health Insurance Every Year?
If you opt for an annual deductible as a part of your health insurance plan, you’ll have to pay it every year. The deductible resets every year, which means you’ll have to start paying it all over again if you want the insurance to cover your medical costs.
But, if you opt for the per-episode deductible, you can pay a deductible each time you receive medical services and not annually.
How Do You Meet Your Deductible?
The amount of your health care deductible is a part of your health insurance plan. Every time you visit an eligible health provider, the money you pay goes towards your deductible until you finally meet the deductible amount.
For example, if your deductible is $1,000 according to your plan, 100% of the expenses that you’ll pay until you reach $1,000 go to the deductible. After that, you will start copaying with your insurance company, depending on your health insurance plan.
A deductible in health insurance plans is a set amount you have to pay from your pocket when you get eligible medical services before your insurance starts covering your medical costs. Different medical plans have different deductibles; some can even include more than one type.
Some of the most common types include comprehensive, non-comprehensive, annual, per-episode, individual, family, in-network, out-of-network, prescription drug deductible, and more.
In this article, you also got familiar with high-deductible health plans (a high deductible, but low monthly premium) and low-deductible health plans (a low deductible, but a high monthly premium). With all this information, you should be ready to choose a health plan that works best for your needs.
Which deductible have you opted in for? Please share your feedback with us in the comments section below.