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Benefits A-Z: A closer look at deductibles

D is for Deductible

When it comes to having medical insurance, the term “deductible” is common to many. Varying in strata, from high deductibles to low deductibles, policy owners pay particular attention to this threshold and with good reason. How much are you expected to pay? When does the insurance company start to contribute? And why am I paying a copay again? We answer all these questions and more below.

What is a Deductible?

Your deductible is a dollar amount you have to pay in full for your medical expenses before your insurance plan begins to cover costs. Until you meet your deductible amount, you are responsible for paying for 100% of your health care.

Plans with varying deductible options range in price, so you’ll often see a choice between a high deductible plan and low deductible plan. So which is better?

High Deductibles

With a high deductible, you’ll have a lower monthly premium. The pro is that you’ll be paying less each month for your insurance. The con is that you’ll have to pay a much higher amount out-of-pocket before your insurance coverage will kick in. It makes more sense for people who are in good health who generally have very little medical bills throughout the year.

Low Deductibles

With a low deductible, you’ll have a higher monthly premium. The pro is that you won’t have to pay as much to meet your deductible before your insurance company starts sharing the costs. Of course, the con is paying a higher rate each month. Low deductible plans usually make more sense for people who have chronic health problems or people who anticipate a lot of medical care or emergency visits. Frequently, families with small children or kids playing sports will opt for a lower deductible plan.

When crunching the numbers and comparing plans, it’s important to consider copays, coinsurance, and out-of-pocket maximums. It can vary by plan, but in most cases, your copay will not count towards your deductible. This can make a big difference, because your copay for doctor visits and prescriptions can add up fast, but it won’t get you any closer to meeting your deductible. Your coinsurance will kick in after you meet your deductible. It’s a percentage that shows the amount you have to pay for your medical expenses, while your insurance company will pay for the rest. You only have to pay your coinsurance until you reach your out-of-pocket maximum. Once you reach that, your insurance company will cover the rest in full. And although your copays don’t count toward your deductible, in most cases they do count towards meeting your out-of-pocket maximum. See below for an illustration of how insurance cost-sharing works.

Insurance Cost Sharing