Health Insurance Deductibles: How They Work and What to Watch Out For

Health insurance is a topic that can cause a lot of confusion and potential stress. One area that seems to cause confusion more than others is how health insurance deductibles work. In this article, we will provide a brief overview of deductibles and give you some tips on what to watch out for when choosing a policy.

What is a deductible?

A deductible is the amount of money that you have to pay out-of-pocket before your insurance kicks in. For example, if your deductible is $1,000 and you need surgery that costs $5,000, you will have to pay the first $1,000, and your insurance company will cover the remaining $4,000.

How do deductibles work?

Deductibles work differently depending on the type of plan you have. There are two different types of health insurance plans: High Deductible Health Plans (HDHP) and Traditional Plans. Traditional plans typically have lower deductibles, and HDHP plans have higher deductibles, but lower monthly premiums.

With HDHP plans, you pay lower monthly premiums because you are responsible for a larger portion of your healthcare costs. For example, you may have a $5,000 deductible, but your monthly premium is only $100. Traditional plans typically have lower deductibles, but higher monthly premiums, which means your monthly costs are higher.

What should you watch out for with deductibles?

When choosing a plan with a deductible, it’s important to consider how much you can afford to pay before your insurance kicks in. Do you have enough savings to cover a $5,000 deductible if you get sick or injured? If not, it may be better to choose a plan with a lower deductible.

Additionally, be aware of how deductibles work in relation to other costs, such as copays and coinsurance. Copays are a fixed amount you pay for services, such as a doctor’s visit or prescription drug, while coinsurance is a percentage of the total cost of a service that you pay.

For example, let’s say you have an HDHP plan with a $5,000 deductible, and a 20% coinsurance. If you break your leg and need surgery that costs $10,000, you will pay the first $5,000 of the deductible, and the remaining $5,000 will be split between you and the insurance company. You will have to pay 20% of the remaining $5,000, or $1,000, and your insurance company will pay the remaining $4,000.

In summary, deductibles are the amount of money you pay before insurance coverage kicks in. When choosing a plan, consider how much you can afford to pay out-of-pocket, and be aware of how deductibles work in relation to other costs like copays and coinsurance. With these tips, you can make sure you choose a plan that fits your budget and your healthcare needs.