How does health insurance deductible work?

Do you have a health insurance policy but are unsure of how the deductible works? A health insurance deductible is the amount you pay prior to the insurance policy covering the costs of your doctor’s appointments, treatments and/or medication, but let’s take a deeper look at how health insurance policy deductibles work.

Health Insurance Terminology

  • Insurance Premium – The amount you pay monthly for your medical insurance.
  • Deductible – Amount that must be met before insurance pays.
  • Coinsurance – usually stated as a percentage. This is the amount the insurance company covers after the deductible is met. The rest of the costs are yours to pay.
  • Copay – A flat-rate fee that you pay for certain medical services, like doctors appointments, medications and medical tests.

Understanding Health Insurance Policy Deductibles

Most health insurance policies have a deductible. They can range from $0 to $10,000 a year or more. Once you activate your policy and start paying your monthly premiums, the deductible is the amount you’ll pay before your insurance policy starts paying your medical expenses, unless you happened to purchase a policy with a $0 deductible. Zero deductible insurance policies will start paying immediately.

Understanding Insurance Deductibles in Practice

Let’s say that you purchased an insurance policy for yourself that costs $250 a month, and that policy comes with a $6,000 deductible. Once your deductible is met, your insurance policy states that it will cover 90 percent of your medical expenses. In order to activate your policy and keep it active, you’ll pay the $250 a month. This ensures that you have health insurance. In addition to the $250 a month, you’ll have to meet your yearly deductible, so let’s take a closer look at how this works in practice.

Example Health Insurance Plan

  • $250 per month
  • $6,000 deductible
  • 90% after the deductible is met

Most insurance policies state that you must meet your deductible each calendar year. This means that if it’s January and you’ve scheduled and gone to your first doctor’s appointment, you’ll probably have to pay the full cost out of your pocket. This is because you still have $6,000 in medical expenses to pay. So, if your doctor’s appointment was $300, you’ll pay the $300, and your insurance company will subtract the amount from your deductible.

$6,000 – $300 = $5,700

Now, let’s say that after a few months, you’ve paid the $6,000 in medical expenses. Once you reach that amount, your policy will cover 90 percent of the costs.

For Example:

You’ve met your deductible, and you’ve gone to your next doctor’s appointment after meeting that deductible. The appointment cost was $300. Your insurance company should pay 90 percent or $270. You will pay $30.

Controlling Your Health Insurance Out-of-Pocket Expenses

Everything you pay from your own finances is considered an out-of-pocket expense. This includes the insurance premiums, deductibles, copays and coinsurance. If you wish to control your out-of-pocket expenses, you can look for policies with lower deductibles and/or policies that include copays.

Example Health Insurance Plan with Copays

  • Monthly Premium – $300
  • Deductible – $6,000
  • Coinsurance – 90%
  • Copay – $30 for doctor’s appointments

In this example, the monthly premium has increased by $50 a month, but the plan now includes a $30 copay for doctor’s appointments. This means that you still need to meet your deductible before the coinsurance activates, but you’ll only pay $30 for visits to a family or general practice doctor. This means that if it’s January and you’re going to your family doctor for the first time, you’ll pay $30 for the visit, regardless of the actual cost of the appointment. The $30 is usually subtracted from the deductible. This can make going to the doctor more affordable when compared to the first example.

Finding the Right Health Insurance Plan with Fearnow

If you need affordable medical insurance, our agents can help you. We can answer your questions and compare plans to help you find one that is right for your budget and medical needs. We’ll also take the time to explain the full costs of your policy, including the monthly premiums, coinsurance, copays and deductibles. Once you’ve found the right policy for your needs, we can take your first payment and activate your policy so that you can have peace of mind when it comes to getting the health care that you need.

To learn more about our group health insurance plans, please give us a call at 813-689-8878.