Health Insurance Terms & Terminology: Deductible

Similar to your automobile insurance deductible, your health insurance deductible is a fixed dollar amount that must be met before benefits are paid.

Deductibles have ranged over the years from zero all the way up to $10,000. Under the Affordable Care act, the deductible for an individual in 2021 cannot exceed $8,550. For a family, the cap for 2021 is $17,100.

While the concept of a deductible is simple, it can be confusing to understand what you have to pay for and when. There’s a lot of conflicting information.

Keep in mind that many plans are different and you’ll need to refer to your policy for exact details, but for the most part, copays for visits to a primary care physician, specialist, or urgent care are accepted from day one. It is not required that you meet your deductible before copays are accepted.

However, while deductibles are not required to be met to access copays for visits, any copays you make in any given year will not be applied towards your deductible. Those copays will be applied towards your out-of-pocket maximum.

Real life scenarios

For example, say you have a $20 copay for doctor visits and you go to the doctor 5 times, effectively spending $100 on copays. If your health insurance plan features a $500 deductible, you’ll still have $500 to meet in the event of needing a service or procedure that requires the deductible be met. Your out-of-pocket maximum of $8,550, however will be reduced to $8,450, since you’ve already contributed $100 towards the yearly maximum allowance.

Once your deductible is met, you’ll often have coinsurance until you reach your out of pocket maximum. Here’s an example of how it works:

Sample Plan Details:

• Deductible: $1,000
• Coinsurance: 80/20
• Out-of-Pocket Max: $8,550

Scenario 1: Broken foot

You trip on one of your children’s toys and break a bone in your foot. After it’s all said and done, the entire bill for the hospital visit is $3,300. Since you have a $1,000 deductible, you’ll need to cover $1,000 of this amount, leaving $2,300 remaining. Your plan’s 80/20 coinsurance leaves you responsible for 20% of what’s remaining, which is $460. This leaves $1,840 remaining that your insurance will cover. The total amount this visit will have cost you is $1,460. Keep in mind that most of this goes on behind the scenes and you won’t know much until you get a bill from the hospital representing what’s leftover to be paid that your insurance didn’t cover.

Scenario 2: Appendectomy

A strange pain in your stomach turns out to be appendicitis and you’re rushed to the hospital for an emergency appendectomy. Final cost: $12,000. using the same sample plan details from above, you’ll initially be responsible for the deductible of $1,000, leaving $11,000 remaining. With coinsurance, you’ll be responsible for another $2,200. Your insurance company will cover the rest, leaving you with a grand total amount due $1,000 plus $2,200, or $3,200 total.

As you can see, depending on your plan, you can still be on the hook for a fair amount in the event of a medical emergency or physician-recommended procedure.

Deciding on a high vs. low deductible

The question you’ll need to ask yourself is, do you want to pay a higher monthly premium for a lower deductible, which in effect lowers your exposure cost-wise in the event of something major, or would you prefer to spend less monthly, knowing that you might be on the hook for a larger amount should something major occur.

You can explore different plan and deductible options by completing our quote request form here or by calling us at (800) 600-9663.

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