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How do Deductible Plans Work?

Most people have heard of the health insurance deductible, but may not be quite sure how it works. Before deciding on a health care plan, it is important to understand the different types of deductibles and how they work. Doing so will help you find the best health care plan for you or help you to get the most out of your current health care plan.

What is a deductible?

Sometimes referred to as high deductible plans, medical deductible, or health deductible, deductible plans typically require you pay a certain amount out of pocket before the health care plan will provide coverage. A deductible is a set amount of money your plan requires you to pay prior to paying for most, if not all, of your medical expenses. Once your deductible is met, you normally have to only pay your monthly premiums, co-pays and co-insurance.

How Deductible Plans Work

Although the details vary by plan, in many health insurance policies, you are permitted to use some medical services, such as regular doctor's appointments or trips to the emergency room before having to meet your deductible first.

Most deductible in health insurance plans are calculated yearly (usually at the beginning of the calendar year). This means you start out on a clean slate at the beginning of your policy year, and need to meet a new deductible requirement.

For example, if your deductible is $1,000, that means all applicable health care visits, treatments, medical procedures, and tests expenses are your responsibility to pay, up to the $1,000. After you have met the $1,000 deductible, your health insurance provided will pay expenses over-and-above $1,000 according to your co-insurance percentage.

Deductibles may also be grouped by family or set up by individually. Generally speaking, a family deductible is double that of an individual deductible.

Health plans can be set up as a high deductible, low premium plan or a low deductible, high premium plan.

Deductible Considerations

If you wanted to reduce your monthly premium costs and are relatively healthy and/or relatively young, a good rule of thumb when choosing your health insurance policy is to choose a plan with a higher deductible. If you do go this route, however, know that if something catastrophic were to occur, your initial medical expenses would be higher until you met your deductible.

However, if you have a serious or chronic medical condition that requires frequent and continuous medical treatment, a high deductible plan may not be best for you. In this case, it may make more sense to choose a plan with a lower deductible, since it would be met relatively quickly. Or, it might be worthwhile to look into a HMO type of plan. Additionally, seniors or people who like to received preventative services may find their total medical expenses higher under a high deductible plan than under a lower deductible or more comprehensive plan.

High deductible health plans are often tied to a health savings account to help the insured add regular amounts of money to use to pay for medical care and certain medications.

In the end, it's important to look at the entire picture, including your health, financial status, deductibles, co-payments and co-insurance when deciding the what the best health insurance plan is for you.

 
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