What is a deductible?

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Whether you’re shopping for health insurance or taking a closer look at your current plan, it’s important to understand the terms that are used to describe your costs and your coverage.

The basics

The amount of money you pay to your insurance company each month to continue your coverage is called a premium.

Beyond your monthly premium, you also will likely end up paying what’s called a deductible. Your deductible is the amount you have to spend for covered health care services before your insurance provider pays anything. This doesn’t include services for which you must pay a copay or preventive services your plan may cover—for example, many routine immunizations and medical exams.

Let’s say your plan has a $1,500 deductible. That means you’ll pay $1,500 for covered services. Then, once your deductible ($1,500) has been met, your health insurance plan will begin to pay for covered services. You may still need to pay a copay for certain services, even after your deductible is met.

What else you should know about deductibles

In general, plans where you pay a higher monthly premium often come with a lower deductible. Plans where you pay a lower monthly premium often leave you with a higher deductible.

Depending on your plan, your deductible may be higher if you get health care from a provider who is out of network, rather than in network.

If you have a family plan, there are two types of deductibles: a non-embedded deductible and an embedded deductible.

  • If your family plan includes a non-embedded deductible: There is only one deductible, the family deductible. It doesn’t matter if it’s one person with all of the expenses or if the expenses are spread out across two or more people. Anytime anyone in the family pays for covered care, that spending counts toward the family’s total deductible. Once that deductible is met, insurance starts paying for covered health care services according to your health care plan.
  • If your family plan includes an embedded deductible: This is a little more complicated.
    • Each covered family member is responsible for paying for covered health care services up to his or her own individual deductible amount. (This may be a different amount of money than the family deductible.)
    • If/when an individual covered family member meets his or her individual deductible before the family deductible is met, insurance will start paying for covered health care services.
    • Once the family deductible amount is met, insurance will begin paying for covered health care for all family members. Even those who have not yet met their individual deductibles—according to the health care plan.

What is a high-deductible health plan?

It’s all right there in the name: a high-deductible health plan, or HDHP, has a higher deductible than more traditional plans. The trade-off for many HDHPs is a lower monthly premium. This means your monthly premium bills are lower, but you’ll pay more out of pocket before your insurer begins to pay. Some HDHP plans also allow you to use a Health Savings Account (HSA) to pay for some of your health expenses. Check your health plan for more information.

Want to brush up on some more health insurance vocabulary? Check out our recent blog on health insurance jargon!

Source: U.S. Centers for Medicare & Medicaid Services.
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