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What Is A Health Insurance Deductible And Why Is It Important?

December 11, 2023

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Health insurance can be a complex topic, particularly when it comes to understanding the specific details of your plan like your deductible. While you may know the basics of a deductible, you may need to understand what counts toward your deductible and how to best navigate getting cost-effective care for your health concerns. 

That’s why we’ve put together this guide to insurance deductibles. We want to supply you with the details and resources to better understand your health insurance deductible and how it functions as a part of your health insurance plan.  Keep reading for a basic guide to insurance deductibles.

 

What is an insurance deductible?

Your deductible is the amount you pay before your insurance plan covers any medical expenses. In other words, it's the amount of money you're required to pay out of pocket before your insurance takes over. This amount varies from one plan to another and is set by your insurance carrier. 

Your healthcare expense money will be credited toward your deductible depending on how your health plan's cost-sharing is structured. So if you visit a doctor or get a procedure done, your insurance carrier will usually pay a portion of the expense, while you will pay the remaining cost based on the cost-sharing agreement.
 

Here’s an example: 

  • Let’s say you need an MRI that costs $600, and you have a $1,000 deductible under your health insurance plan. 
  • If you've already paid $200 toward your deductible, the remaining $400 will be credited to your deductible, reducing the amount you need to pay out of pocket for future medical expenses.

 

As you’ll see, understanding how your health plan's cost-sharing works and how it affects your deductible is crucial for managing your healthcare expenses. When picking a health insurance plan, it’s imperative to assess the deductible amount and match it with your anticipated healthcare expenses. The right health insurance plan for you will depend on your deductible amount and what you can comfortably pay out of pocket

 

What counts toward your insurance deductible?

The specifics of what counts toward your deductible can vary depending on your health insurance plan. When asking the question, "What is an insurance deductible?", you’ll also need to know that some health plans may exclude certain services, like cosmetic surgeries and elective procedures, or have different rules for what counts toward the deductible.
 
Generally speaking, the expenses that count toward your deductible include:

  • Doctor Visits
  • Prescription Drugs
  • Hospitalizations
  • Outpatient Procedures

Other treatments may be managed through coinsurance, in which you’d pay a percentage of the total cost. Some instances where your deductible typically won't apply are:
 

  • Preventive Care: Examples may be routine check-ups, screenings, and vaccinations that are recommended by your doctor to keep you healthy. Since these services are meant to prevent health problems from arising in the first place, they're often covered by insurance plans without any cost-sharing requirements like deductibles or copayments.
  • Emergency Care: In situations where you need to seek urgent medical attention, you may not have the time or ability to research your insurance coverage or check your deductible. But many health insurance plans have an exemption in place for emergency care so you can get the treatment you need without worrying about the cost. Depending on the plan some insurance policies may apply deductibles to ER visits.

 

Deductibles and Out-of-Network Providers

Another important thing to note is that some people may not realize that seeing an out-of-network provider (doctor, specialist) won’t count towards their plan deductibles. 

Out-of-network providers are medical professionals or facilities that aren't covered by your health plan. And some health insurance plans don't cover out-of-network care at all, which means you'll be responsible for paying the full cost out of pocket. This can be an unexpected surprise, which is why it’s essential to understand your health insurance plan and its associated costs. 
 

Did You Know? 
The federal No Surprises Act was enacted in 2022 to provide relief from surprise medical bills that are sent by providers who are not in-network with their patients, which can often arise unexpectedly. This, in turn, left patients with costly medical expenses. But under the No Surprises Act, healthcare providers can no longer send balance bills to patients for emergency situations or situations in which the patient goes to an in-network facility but unknowingly receives care from an out-of-network provider during the visit.


 

How do deductibles work with different types of health plans?


When it comes to your deductible, health insurance plans are structured in two primary ways. The first type is where you pay first until your deductible is met, then your insurance will begin to pay, and you'll solely be responsible for copays and coinsurance. The second type of plan will cover the cost of certain non-preventive services even before your deductible is met. 

A high-deductible health plan is one option to consider if you don't use your insurance often. This type of medical insurance comes with a high deductible requirement but often comes with lower monthly premiums. In this case, you’re responsible for paying most out-of-pocket expenses before your insurance benefits kick in, but you'll have a lower monthly premium to pay. This plan works best for individuals who are healthy and don't require frequent medical visits as it helps to save on yearly healthcare costs.

While under certain plans, you're responsible for your healthcare costs before meeting your deductible, that doesn't mean you'll be paying the full billable price for your treatment or appointment. Insurance companies negotiate rates with providers who are in their network. 

The exact amount you'll be responsible for paying will depend on the terms of your insurance plan, but in general, you should stick to in-network providers as much as you can. Insurance companies negotiate lower rates with in-network providers because they know that these providers are more likely to follow established protocols, which can lead to better outcomes for patients.
 

Tips To Save On Health Insurance Costs
 

When comparing health insurance plans, don’t just look at premiums - make sure you understand the other costs under your plan including deductibles. Again, it’s recommended to assess the deductible based on your healthcare needs and anticipated medical expenses for treatments or procedures.

Remember, depending on the plan, you might find that you're better off with a plan that has a higher deductible. Some high-deductible health plans come with features such as Health Savings Accounts (HSAs), which allow you to set aside pre-tax money for your healthcare expenses throughout the year. Not only does this reduce your taxable income, but it also provides you with a financial cushion in case of a medical emergency.

Another tip is to ask your insurance company if it offers discounts or incentives to lower out-of-pocket expenses. For example, you may be eligible for a discount if you bundle multiple insurance policies or if you complete certain healthy activities. You can also check if you’re eligible for any state programs or Medicaid, which may provide you more affordable health insurance coverage if you qualify as a low-income individual or family. 

Get Help Understanding Insurance Plan Costs 

While health insurance plan deductibles can be complex, you don’t have to go through it alone to better manage your healthcare needs and finances. Knowing which services are exempt from your deductible can make a big difference in your health care expenses. If you're ever unsure if an office visit, treatment or procedure will count toward your deductible, it's always best to review your insurance policy documents or contact a customer service representative at your insurance company.

You can also compare health insurance plans using our website. Just enter some basic information to view plan costs, such as deductibles, for private health insurance plans or Medicare Advantage plans in your area. Or, you can call 1-800-596-1715 (TTY 711) to get help from one of our licensed insurance agents.

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