Health Insurance Deductibles: Here’s How They Work

A deductible is a specified amount or capped limit you must pay out of pocket before your health insurance will begin paying for medical bills. It is paid directly to your medical provider, and not to the insurance company.

If you have a $1,500 deductible, for example, you must first pay $1,500 before your insurance will cover any of the expenses from a medical visit.

At the start of your policy period, your deductible automatically resets to $0. Most policy periods are one year long and after a new period starts, you will be responsible for paying your deductible until it is met.

Deductible vs. Premium

The premium is the amount you pay each month to your insurance company. If you never use your health insurance, this is the only payment you will have. On the other hand, you pay a deductible only if and when you use your insurance coverage.

Deductible vs. Copay

While the health insurance company will begin paying for your healthcare expenses once the deductible is met, you may still have to make a copayment at the time of your appointment. A copay is a fixed amount set by an insurance plan for sharing the cost of covered services between the customer and the plan.

Deductible vs. Coinsurance

Some health insurance plans limit the percentage of medical claims they will cover. The policyholder is responsible for the remaining percentage – an amount is called coinsurance. You only begin paying coinsurance after your deductible is met.

Deductible vs. Out-of-Pocket Maximum

The out-of-pocket maximum is the most you will have to pay for medical expenses during a policy period. Once you reach your out-of-pocket maximum, your insurance plan will pay all additional expenses. The deductible you pay is part of your out-of-pocket maximum.