Health Insurance Deductible – What You Need To Know

Written by Michael Nadeau

NowRx Contributor 

health insurance deductible benefits

Are you wondering about the health insurance deductible system?

It’s okay to feel a bit lost when it comes to health insurance, deductibles, and the many, many terms that come along with it.

However, this blog will help simplify things and give you a high-level overview of what you need to know.

Let’s dive in!

What is a Deductible?

Generally speaking, a deductible is an amount a person will have to pay out of pocket annually before their insurance will provide coverage.

Many different types of insurance plans offer deductibles. You might pay a deductible on your auto insurance, for example, or on your home insurance.

An important note: deductibles are not in every health insurance plan. Also, the details of a deductible might vary from one person’s plan to another.

Now, let’s take a deeper dive into the details of health care plan deductible.

How Does a Deductible Work?

A deductible works through an individual — the insurance policy owner — paying out a set amount of money towards their insurance costs. After that set amount of money is hit, the insurance company takes over to cover the bulk of the rest of the expenses.

Let’s use a real-world example. For an individual’s health plan, a typical deductible might be around $1,500. If that individual had to go into the hospital for a surgical procedure (an appendectomy, perhaps), the total bill might come to around $10,000.

In that case (provided the individual hadn’t gone to any other visits that year that go towards the deductible), the individual would owe the full $1,500 deductible. However, the insurance company should (in most cases) then pay the balance of the bill — the full $8,500.

After that, most of the health insurance costs for the rest of that individual’s year should get covered by his health insurance plan. Once the year is over, the plan resets, and that $1,500 deductible goes back into place.

That’s just one simple example of how a deductible works. As we said before, every health insurance plan is different regarding its deductible and what goes towards it. Be sure to check your plan closely to get a sense of what you might owe, or call your insurance company with any questions.

What is the Medicare Deductible for 2021?

Have questions about the Medicare deductible for 2021?

If you’re covered by Medicare, it’s crucial to know how the deductible for 2021 works. There is a deductible for both Medicare Part A and Part B. For the less-common Part A, the deductible is $1,484 for the year. For Part B (which most Medicare recipients will have), the deductible is only $203 a year.

However, as we mentioned above, a low or high deductible is not the only thing you need to consider with your health insurance plan. Consider what your other out-of-pocket costs will be and choose a plan that works best for your individual circumstances.

Note that these numbers will increase in 2022. Keep an eye out to see what the new numbers are.

Deductible vs. Copay

It’s very important to understand the difference between a deductible vs. copay.

They’re similar in this one fact: both the deductible and the copay will come out of the individual’s pocket. However, they have some major differences as well.

As we covered above, the deductible is the total amount you have to pay each year before insurance will begin to cover your health care expenses. Think of it as the bar you need to reach before insurance kicks in. For most health insurance plans, the full deductible could run well into the hundreds or thousands of dollars. However, this will depend on the details of your individual plan.

In contrast, a copay is the fixed out-of-pocket amount your insurance requires you to pay for each covered healthcare service and then they cover the rest. You can remember a copay like this. You are co-paying for whatever the health care service is and your insurance is co-paying for the rest. Typically, your insurance will require a copay for services like prescription medication fills, doctor visits, x-rays, etc.

Copays are usually much less expensive than deductibles but this will depend on your individual health insurance plan. Additionally, you are responsible for a copay at every visit, whereas once you have met your deductible for the year you will not need to pay until it resets the following year.

Ultimately, you will need to evaluate your personal health circumstances to find a health insurance plan with a copay/deductible combination that works best for you!

Do copays count towards deductible?

A lot of people ask if copays count towards their deductible – in short, they might.

It all depends on the details of your specific health care plan. In some, the copay might count towards your plan’s overall deductible, others won’t, and others might not even require a copay until the deductible has been met.

It’s essential that you study the details of your health insurance plan to get a handle on what you might owe throughout the year. This will help you when it comes time to decide whether to choose a new plan or stick with your current one each year.

High Deductible Health Plan

A high deductible health plan is one of the different options you might have when you select your annual health insurance. With a high deductible health plan, you’ll likely pay lower premiums every month. Premiums are like the membership fee you pay each month to be a part of an insurance plan.

However, if you do end up needing some type of health care, a high deductible means you will have to spend much more before your insurance will help you pay!

On the opposite end, a low deductible health plan will generally have a higher monthly premium (membership fee). However, if you require a number of health care services throughout the year your insurance will kick in much faster.

In general, choosing whether to go with a high deductible plan will depend on your individual circumstances. If you are young and healthy without any need for frequent medical services then a high deductible plan might be right for you. Conversely, if you have chronic health problems or require frequent health care services then you might be better off with a lower deductible.

Health Insurance Deductible

So, why does the health insurance deductible system exist at all? Simply put, the deductible system is in place to try and control costs for the health insurer. The idea is that this will help the insurer offer better prices to the entire “network” or group of individuals they cover.

This system also offers many people the flexibility they need to lower out-of-pocket costs throughout the year. Ultimately it is up to you to find a plan that works best for your circumstances.

Did we answer all your questions about health insurance deductibles?

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