Nobody likes to get an unexpected bill, especially one related to a necessary medical service. But it's easy to be taken by surprise if you don't understand your health insurance deductible. To avoid being caught off guard, it’s important to understand the definition of a deductible, and what percentage of your medical expenses your insurance will cover before and after your deductible has been paid. Knowing how to factor in your health insurance deductible based on your needs will allow you to prepare financially for any upcoming costs and prevent sticker shock in case of emergencies.
In this article, we explain what a health insurance deductible is, how it works, and answer common questions that should be factored in when choosing a health insurance plan.
Source: Barcellos et al, Proceedings of the National Academy of Sciences, 2014
What is a health insurance deductible?
A health insurance deductible is the amount of money you must pay towards medical expenses, such as a doctor’s visits and prescriptions, before your insurance kicks in. For example, with a $1,000 deductible, you’re responsible for paying the first $1,000 of covered services yourself. Once you meet your deductible, your insurance will help you pay for additional medical expenses.
How do I meet my deductible?
Let’s say you’re a relatively healthy 40-something-year-old but end up in the emergency room with a broken leg. One month later you receive the bill.
The total cost is $1,500: $1,000 for the emergency room visit + $500 for the cast
If you pay $1,000 towards your emergency room visit, you’ve met your deductible. Now your insurance company pays all or a portion of the $500 towards your cast, along with any future healthcare expenses for the rest of your plan’s coverage year.
How does a deductible work on a family plan?
If you have more than one person on your health plan, such as your spouse or child, you'll usually have both an individual and a family deductible. In this case, when you pay towards the deductible for a particular family member, that amount is counted towards both their individual deductible and the family deductible. However, it’s important to note that any spending above and beyond an individual’s deductible won’t count towards the family deductible.
Once an individual meets their deductible, the health insurance company will start paying for all or a portion of their care. Once the family deductible is met, then the plan will pay for all or a portion of medical costs for everyone in the family, even if they haven't met their individual deductible. For ACA compliant health plans, the family deductible is capped at two times the individual deductible.
Do I want a high or low deductible?
Whether a high-deductible or lower deductible plan is right for you really depends on your personal circumstances. As a rule of thumb, the more you pay in monthly premiums, the lower your deductible will be. If you plan to use your health insurance coverage frequently — say if you have a chronic medical condition or expensive prescriptions — it may be worth choosing a low-deductible plan so that your health insurance company begins sharing your healthcare costs sooner.
READ MORE: What To Consider When Choosing A Health Insurance Plan
On the other hand, if you're healthy, you may be comfortable picking a plan with lower monthly premiums and a higher deductible. However, it's important to keep in mind that if you do have a medical emergency or your medical situation changes (like if you or your partner become pregnant), you typically need to pay the full dollar amount of your deductible before your health insurance kicks in.
Do I have to pay my deductible before I go to the doctor?
The cost of your deductible might be daunting, but it should not prevent you from going to the doctor. Since 2014, the Affordable Care Act has required that all plans cover preventive care services for free. That means, you won’t be charged for services like blood pressure screenings or vaccinations, even if you haven’t met your deductible.
Some plans created before 2014 are known as "grandfathered" plans and don’t have to meet this requirement. So you could still be charged for preventive care if your health plan is in this category. If you’re concerned this might be the case, you can always call your insurance company and ask.
Do copays count toward my health insurance deductible?
Many plans also let you access certain healthcare services at a more affordable price before you’ve met your deductible. They do this by charging a copay or flat fee, rather than the full cost. As of 2016, the most common services covered this way were primary care doctor visits and generic drugs. However, these types of medical services, where you’re only charged a copay, typically do not count towards your deductible.
“The Affordable Care Act requires that all ACA health insurance plans cover preventive care services for free.” — Click to Tweet
To figure out whether your plan covers any healthcare services before you’ve met your deductible, look at your plan details. Next to each service listed, it should say whether the copay applies before or after you’ve met your deductible.
☞ If you're wondering how your deductible, coinsurance, and copayments work together, check out this article.
Do all medical expenses count towards my deductible?
Not all medical bills are covered by your insurance, and therefore, not all medical expenses count towards your deductible. Many health insurance plans do not cover services such as acupuncture, fertility treatment, or weight loss surgery. So it’s important to check what your plan covers before making the appointment. Otherwise, you could be on the hook for the whole bill without even making a dent in your deductible. Every plan is different, so always remember to check ahead of time.
How do prescription drug deductibles work?
When it comes to prescriptions, many plans have just one combined deductible that applies to both your medical services and prescription drug costs. However, some health insurance plans will separate them into two different deductibles. It's important to check your plan details to see how your health coverage is set up. That way, you can plan your medical costs appropriately.
READ MORE: What To Do When Your Health Insurance Doesn't Pay For A Medical Service
In the past, some pharmaceutical companies offered programs or coupons to help pay towards the cost of expensive drugs. These coupons counted towards a patient's deductible. However, in 2018, many insurance companies started to change their policies, and unfortunately these coupons may no longer count towards your deductible. If you are using or have been prescribed a drug with a financial assistance program, you should check your plan details to find out whether this assistance will count towards your deductible or not.
So how much is the average healthcare deductible?
Deductibles vary significantly depending on the type of health insurance coverage that you have.
Employer Insurance
If you receive health insurance through your employer, chances are your deductible is fairly reasonable - in 2018, the average deductible for an employer-sponsored plan was $1,573, according to a study by the Kaiser Family Foundation.
Marketplace (“Obamacare”) Insurance
Let's say you buy insurance through the Health Insurance Marketplace, also known as HealthCare.gov. The amount of your deductible will depend on the type of health insurance plan you choose and your annual income. In 2016 (the last year data is available) most people who enrolled in a Marketplace health insurance plan had an annual deductible of $850 or less. However, deductibles for some health plans can be a lot higher. Up to a maximum of $7,900 for one person or $15,800 for family coverage. Also, some people who make under certain income limits can qualify for a Cost Sharing Reduction (extra financial assistance). This can lower their deductibles, along with other out-of-pocket costs.
Medicaid
If you enroll in Medicaid, a program that provides low or no-cost health insurance for some people with lower incomes, you may not have to pay towards a deductible. Medicaid services are free from the start. However, this depends on your state, age, and income. This changes from state to state, so you should check your state's Medicaid program to be sure.
Medicare
Medicare, on the other hand has fixed nationwide health insurance deductibles for each part of Medicare (Part A, Part B, Medicare Advantage, and Medicare Supplement.
☞ Find out what other out-of-pocket expenses you may be responsible for in this article.
While health insurance deductibles can be pricey, they should not be a deterrent in receiving medical care or preventive services. For more information on choosing a health insurance plan that’s right for you, check out the following articles:
What You Need To Know About Pre-Existing Conditions And Health Insurance
How Much Does Obamacare Cost?
What Did ACA Health Insurance Cost In Your State This Year?
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