A deductible is the fixed amount of money you owe each year for your healthcare bills before your health insurance plan begins to pay its portion. Understanding how much you have to pay out of pocket, meaning the cost of your healthcare for which you are responsible, is very important.
Here’s how a deductible works. You sign up for a healthcare plan that starts January 1 and have a $1,000 deductible. In January, you get sick and visit your doctor, who has an in-network contract with your insurance plan to provide services in your area. He says you have the flu. Your total bill for seeing the doctor and getting a prescription for medicine to treat the flu is $150. You pay all of the $150. Your health insurance pays nothing. The $150 you paid, however, is credited toward your deductible, meaning you will have to pay $850 the rest of the year for other healthcare services before your insurance company starts to pay.
In April, you step in a hole while running and break your ankle. You visit the emergency room for treatment. You come home with a cast on your ankle, crutches, and a prescription for pain medicine. Your total bill is $2,000. You pay $850, any copayments and coinsurance your plan requires you to pay, and your insurance pays the rest.
If you have another health problem during the rest of the year, you will pay any copayments and coinsurance your plan requires you to pay, while your health insurance takes care of the rest of the bill.
In January, you start the process all over again when you sign up for a new healthcare plan or renew your current plan.
Some healthcare plans have an out-of-network deductible. This cost for care is usually higher than your in-network deductible. That means if you have a $2,000 deductible for out-of-network care and are on vacation and break your ankle, you will have to pay the entire $2,000 bill for your care.
If your plan covers your entire family, you will probably also have a family deductible.
Most plans will cover some preventive care. That means you will not have to pay anything toward your deductible if you need your cholesterol checked, a flu shot, or several other pre-determined preventive services.
Different insurance plans have different deductibles. Some insurance plans will not pay for some medical devices you might need. It is very important to understand all of your deductible costs before you sign up for a health insurance plan. If you visit your doctor often, you might want to choose an insurance plan that has a lower deductible. If you have a lower deductible, however, your premium (the monthly amount you pay for health insurance) may be higher.
You should always consider all of your anticipated healthcare costs, as well as plan for unanticipated healthcare costs, before choosing a health insurance plan.
June 15, 2015
Christopher Nystuen, MD, MBA