What is a deductible and how can it affect the cost of your health care? A deductible is the amount you pay out of pocket for medical services before your health insurance plan begins to cover its share of the expenses. Depending on the type of plan you enroll in, you may have either a high or low deductible.
How Do Deductibles Work?
Deductibles are a staple in most health insurance plans, and how much you pay toward your deductible varies by plan.
According to Investopedia, “If you get into an accident and your medical expenses are $2,000 and your deductible is $300, then you would have to pay the $300 out of pocket first before the insurance company paid the remaining $1,700.
However, if your accident only resulted in $300 in medical expenses, then you would pay the $300 deductible and the insurance company would pay nothing.”
As soon as you pay the total amount of your deductible, your health plan will start paying its portion of the cost.
The Difference Between Deductibles and Other Out-of-Pocket Expenses
In addition to deductibles, there are other out-of-pocket expenses you may be responsible for paying when you receive health insurance. Out-of-pocket costs include deductibles, coinsurance, and copays.
“Coinsurance is a way for you to share your healthcare costs with your insurance company. Your coinsurance can be anything from 50/50 to 80/20 depending on the type of insurance policy you choose. In the case of a 50/50 coinsurance, you will pay half of your healthcare expenses, while your insurance company pays the other half (once your deductible is met, in most cases).
This means that a $500 procedure will only cost you $250 and the other $250 will be paid by your insurance company. In the case of an 80/20 coinsurance, that same $500 procedure will only cost you $100, and your insurance company will pay the other $400.
A copayment, or copay, is a flat fee that you pay for certain healthcare services once you have met your deductible. If your copay for a general doctor’s visit is $20, you will pay your $20 copay at the time of your visit rather than the full amount of the visit.”
In short, your coinsurance, or cost-sharing, begins after you’ve met your policy’s deductible amount. A copayment is a predetermined cost for particular healthcare services that is required at the time you receive care.
High-Deductible vs. Low-Deductible Health Plans
While most health insurance plans include a deductible, how high or low your deductible is can vary. Generally, there are two types of plans: High-Deductible Health Plans, or HDHP; and Low-Deductible Health Plans, or LDHP.
Forbes explains high-deductible health plans: “For the insurer, a higher deductible means you are responsible for a greater amount of your initial healthcare costs, saving them money. For you, the benefit comes in lower monthly premiums.
If you have a high-deductible plan, you are eligible for a Health Savings Account (HSA). These accounts allow you to set aside a limited amount of pre-tax dollars for medical expenses. In the case of employer-sponsored health insurance, companies may contribute to their employees’ HSAs, sometimes even matching employee contributions, leading to considerable pre-tax savings.
Generally, your HSA is linked to a debit card that you can use on out-of-pocket costs, including that high deductible. Because the money in your HSA isn’t taxed like the rest of your income, it serves a dual purpose: helping you set aside money to cover healthcare costs and reducing your tax burden.”
Because HDHPs’ monthly premiums are typically low, it can be affordable to individuals who are generally healthy and don’t need to visit a doctor except for annual exams or preventive care.
Under the Affordable Care Act (also referred to as Obamacare or the ACA), HDHPs can include many preventive care services that won’t require paying toward your deductible to receive. These preventive services include:
- Abdominal aortic aneurysm screening
- Alcohol misuse screening and counseling
- Aspirin use
- Blood pressure screening
- Cholesterol screening
- Colorectal cancer screening
- Depression screening
- Type 2 diabetes screening
- Diet counseling
- HIV screening
- Immunization vaccines
- Obesity screening and counseling
- Sexually Transmitted Infection (STI) prevention counseling
- Tobacco use screening and cessation interventions
- Syphilis screening
On the other hand, a low-deductible health plan can be beneficial for individuals and families who need to frequently or routinely visit doctors, specialists, and hospitals for care.
Forbes explains these plans: “With a low-deductible plan, or even a no-deductible plan, the amount you have to pay before your insurance company takes over is far less overwhelming. But you’ll pay a much higher premium for these plans. Though specifics vary by location and plan details, a low-deductible plan can cost at least twice as much per month as a high-deductible plan.”
In short, if you’re looking to keep your monthly premiums low, you may opt for an HDHP. However, if you and your family require frequent, expensive healthcare services, an LDHP may be more suitable for your budget.
No matter which type of plan you’re interested in, HealthMarkets can help you find the right one for your family. Contact us today to discuss your unique health needs and compare your options.
Lower Your Healthcare Costs with Subsidies
No matter how high or low your health policy’s deductible is, having the option to lower how much you pay out of pocket can help out any family’s budget. For low-income families, you may be eligible for a health insurance subsidy to help lower the cost of your monthly premiums or out-of-pocket expenses, including your deductible.
The Premium Tax Credit is a subsidy that helps families making a modest income afford the cost of their monthly premiums. You can receive this subsidy in one of two ways:
- You can have this credit paid to your insurance company from the federal government to help lower or cover the cost of your monthly premiums; or
- You can claim the entire amount of credit you’re eligible for in your annual tax return.
In order to be eligible for this tax credit, you must meet these requirements:
- You must have a combined annual household income between 100 percent and 400 percent of the Federal Poverty Line.
- You must not be eligible for Medicaid, Medicare, CHIP, or TRICARE.
- You cannot have access to affordable coverage through your employer’s plan.
- You must not be claimed as a dependent by another person.
The Cost-Sharing Reduction is an additional subsidy that helps families making a modest income afford out-of-pocket expenses when receiving health care. This means that when you go for a health service, you can have the amount you must pay in deductibles, copay, or coinsurance lowered or covered.
In order to be eligible for this reduction, you must meet these requirements:
- You must have a combined annual household income between 100 percent and 250 percent of the Federal Poverty Line.
- You must be enrolled in a Silver-tiered health plan.
Want to see if you’re qualified for a health insurance subsidy? Consult with a licensed HealthMarkets agent today to see if your family meets the requirements for lowered monthly premiums or out-of-pocket costs.
Consider Deductibles When Shopping for Health Insurance
Before you begin shopping, here are some key things to consider when looking at health insurance and deductibles:
- “Carefully review your budget to determine how much you can afford to pay each year in out-of-pocket medical expenses.
- Be sure you can afford to pay the premiums for the insurance plan you choose, as well as cover the deductible and any copayments or coinsurance that may be required.
- Check to see what medical services apply to the deductible. There are likely some medical services that the insurance plan will help cover, even if you have not yet met your deductible.
- Some common types of services that are covered before you’ve met your deductible are immunizations, health screenings, and other types of preventive medical care.”
Preventive care, as well as other aspects of healthcare reform, can be a bit confusing. Let a licensed agent help you understand.
When you’re ready to learn more about what a deductible is, and get the coverage your family needs, contact HealthMarkets. With our Best Price Guarantee, we’re confident we can find affordable healthcare options with health insurance providers local to you—and best of all, we’ll do it for free.
We’re available 24/7 to answer your questions. Contact us online to get a free quote, meet with one of our licensed agents in person, or call us at (800) 360-1402 . Let’s get you enrolled in an affordable health plan today.
“Definition of ‘Deductible’ — Investopedia.” | “Definition of ‘Coinsurance’ — Investopedia.” | “Definition of ‘Copay’ — Investopedia.” | “Should I Choose A High Or Low Deductible Health Insurance Plan? — Forbes.” 2014. | “Preventive Services Covered Under the Affordable Care Act — HHS.” 2010. | “Questions and Answers on the Premium Tax Credit — IRS.” 2015. | “In Addition To Premium Credits, Health Law Offers Some Consumers Help Paying Deductibles And Co-Pays — Kaiser Health News.” 2013. | “Explaining Health Care Reform: Questions About Health Insurance Subsidies — KFF.” 2014.