How do Health Insurance Deductibles Work?

One of the common elements of many health insurance plans is the inclusion of deductibles. If you’re new to the health insurance world, deductibles can be a bit confusing, but let’s discuss how deductibles can affect your insurance costs. 

How do deductibles work with health insurance?

To understand how deductibles work, it’s important to mention benefits and coverage first. Health insurance coverage varies according to the company and the plan. Most include essential benefits such as outpatient and inpatient hospital care, emergency services, pregnancy, maternity care, preventive care, medical equipment, prescription drugs, lab services, and more. And most providers have additional benefit packages that you can purchase for extra coverage. 

For the plan you purchase, you pay a monthly premium for the benefits it covers. The amount of the premium depends on the coverage you get. The more comprehensive the coverage, the higher the cost. And, no matter how much your deductible is, or whether you’ve met your deductible, you must always pay your monthly premium to get your insurance benefits. 

Your annual deductible is the amount of money you pay out-of-pocket (during the calendar year) for medical services that are included in your plan’s coverage. When you have paid the amount of your deductible, then your provider begins paying for medical services. Even if you have paid your deductible, you may still have coinsurance or copayments to pay for every medical service you get. The amount depends on your plan. 

You can choose a plan with a high or low deductible. Premium costs may vary along with the deductibles.  Plans that have a lower monthly premium rate usually have higher annual deductibles, and vice versa.  

Which option you choose depends on your personal or family’s financial situation. If you choose a high deductible to get lower monthly premiums, you have to consider whether you’ll be able to afford hefty medical bills if you get sick or injured. On the other hand, if you choose a lower deductible, will you be able to afford the higher monthly payments? 

What if a health insurance plan has more than one deductible?

You might have more than one deductible in your insurance policy to deal with. With Medicare coverage, there are the Part A and Part B deductibles, but you may have even more, depending on which insurance plan you choose. If you are under 65 and enrolled in an individual or family
policy, you may have one deductible for your basic benefits, one deductible for prescription drug coverage, and another deductible for additional benefits packages. For family health insurance coverage, you might have a deductible for each person on the policy together with a deductible for the entire policy. 

Most likely, your insurance policy will also have coverage for certain preventive care services that don’t require a deductible or copayments. Here’s an example: according to federal laws, new plans must offer full coverage for routine mammograms for women who are 40 and over. And this benefit carries no deductible or copayment for the beneficiary. 

Why do health insurance plans have deductibles?

Deductibles are cost-saving tools for both parties. On the one hand, beneficiaries can choose payment options that fit their budgets. Healthy people that don’t get sick or injured often can handle a larger deductible and get smaller monthly premiums. 

On the other hand, insurance providers also benefit from deductibles. When beneficiaries realize they have to pay their deductible first, they tend to be more cautious about getting expensive medical treatment or emergency care that they could otherwise avoid. 

Having deductibles helps eliminate small claims and big costs for the insurance provider, keeps premiums affordable for the insured, and helps prevent fraudulent claims that don’t benefit either party.