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Health Term Explanation: Deductibles
Answers to the Top 5 Questions About Health Insurance Deductibles
September 16, 2024 | 6 min read
Health insurance can seem really complicated, but it is easier when you know all the parts that make health plans work. Deductibles are an important piece of the puzzle and affect how much you pay for your healthcare services. Understanding deductibles will help you choose a plan that works for you.
1. What is a Deductible?
A deductible is the amount you pay each year for certain medical expenses before your health insurance plan begins to pay some of the costs of covered services. The amount depends on the plan, but deductibles can range from very low to very high.
Marketplace plans in the “gold” level could have $0 deductibles. This means that the plan pays all costs, except copays, right away. Such plans have higher premiums. Other plans, such as those in the “bronze” level, could have higher deductibles but would have lower premiums. Which deductible is the best fit for you and your family depends on your healthcare needs.
2. How Does the Deductible Work?
If your health insurance plan has a $1,600 deductible, you will have to pay the first $1,600 in medical expenses from your own pocket before your health plan will start paying. Once you reach your deductible, you may be responsible for coinsurance, where you and your plan share costs. And you will likely still have copayments for some covered services.
Pro Tips
Most preventive services, such as vaccinations and screenings, are covered at no cost to you. You won’t have to pay for them, even if you haven’t met your deductible.
3. How Much Is a Typical Deductible?
The amount depends on the plan and your location, but deductibles can range from very low to very high. For 2024, deductibles for marketplace health insurance ranged from $0 to more than $8,000.
When you shop for plans, you can easily view the deductible amounts. The right fit for you will likely depend on your family and your health needs. If you expect to frequently visit healthcare providers, you may want to choose a plan with a lower deductible.
4. Could I Have More Than One Deductible?
If you have family coverage, it’s possible that each person on your plan will have a deductible, and you’ll probably also have a family deductible. The individual deductibles usually count toward the family deductible. You may also have a separate deductible for your prescription drugs.
In addition, if you change plans during the year, you and your family will restart progress toward the new plan’s deductible.
5. What Counts Toward the Deductible?
You will meet your deductible by paying for covered healthcare services during the year. Not all healthcare services count toward your deductible, and your monthly premium payments and copayments are excluded.
Most costs for covered, in-network services will count toward your deductible, such as:
- Lab tests
- Medical treatments
- Medical devices
- Surgery
- Hospitalization
Costs that are often excluded from your deductible:
- Monthly premiums
- Payments for services not covered by your plan
- Costs for out-of-network services although this may vary by plan
If you select healthcare coverage on the Health Insurance Marketplace, you may be able to find plans with deductibles as low as $0. Browse our affordable marketplace plans or call us at 844-933-0380 (TTY: 711) from 8 a.m. to 9 p.m. ET to find a plan with the right deductible to fit your needs.
Questions About Deductibles
It depends on your health needs and your budget. If you and your covered family members are in good health and don’t often see a doctor, a high-deductible plan may be a better option. But if you think you or your family members may need to seek medical care often, a low-deductible plan may be the best fit.
A high-deductible plan may be a good fit if you and your covered family members:
- Are in good health and rarely seek medical care
- Want to benefit from a lower monthly premium
- Are able to pay medical expenses out of your pocket during the year
A low- or no-deductible plan may be a good fit if you and/or your covered family members:
- Have a chronic health condition
- Require costly medications
- Are pregnant or plan to become pregnant
- Have small children
- Are unable to pay expenses, possibly unexpected expenses, out of your pocket
A copay, also known as a copayment, is a set amount that you pay toward certain covered services. This is generally paid to the provider at the time of service.
A deductible is the amount of money you pay out of pocket before your health plan begins to pay some of the costs of covered services.
Every year, the IRS determines the value of a high deductible. For 2024, the IRS defined a “high-deductible health plan” as a health plan with “an annual deductible that is not less than $1,600 for self-only coverage or $3,200 for family coverage.” However, many health plans have deductibles that are much higher than $1,600.
A high-deductible plan may be risky if you are older, have chronic health conditions or have other medical issues. If you choose a high-deductible plan and then end up having several healthcare expenses all at once, the costs can add up quickly and become a financial burden.
If you want the lower premium that comes with a higher deductible, you can lessen your risk by choosing a deductible that matches the savings or other financial resources you have available for out-of-pocket expenses.
This may depend on your plan, but, usually, copays do not count toward your deductible. However, copays do typically count toward your out-of-pocket maximum.
Once you meet your deductible, your health plan will begin paying a portion of your medical expenses. But if your plan requires copayment for certain services, you will still have to pay those amounts. Copays are fixed fees determined by your health plan.
If you are healthy and choose a plan with a high deductible, there is a chance that you may not meet your deductible in a plan year.
Generally, the amount you have paid toward your deductible will reset to $0 at the start of each plan year.
When you shop for health insurance, you can opt to see if you qualify for savings, called subsidies. If you qualify for a cost-sharing reduction subsidy, you may be able to get a lower deductible, but you will have to enroll in a “silver” level plan. If you are eligible and enroll in a silver plan, you will automatically have the version of the plan with reduced cost-sharing charges, which includes lower deductibles.
Sources:
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