What is a health insurance deductible? (2024)

Shopping for a health insurance plan can be overwhelming. It’s almost as though health insurance companies have their own language, and if you don’t know it, you might not know what you’re buying.

One of the terms that comes up a lot — and is important to know — is “health insurance deductible.” You’ll want to know what your deductible is for any plan you are considering.

Below, learn what a deductible is, and why it’s so important to know about it.

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What is a deductible in health insurance?

A deductible is the amount you pay out of your own pocket for covered health care services before your insurance plan begins paying. So, if you have a $2,000 deductible, for example, you’ll pay the first $2,000 of covered services yourself.

The average cost of a deductible for an Affordable Care Act (ACA) insurance plan is a little more than $3,000, according to the Kaiser Family Foundation.

But many people pay less than that because they qualify for subsidies. These are premium tax credits or cost-sharing reductions offered by the government.

You may be able to find a plan whose deductible is less than that, but it’s very rare, says Adria Gross. She’s CEO and founder of MedWise Insurance Advocacy in Monroe, New York. “You might be lucky enough to land a job at a company that pays the deductible for its workers, so you don’t have to pay anything,” she explains.

A deductible is different than a premium, which is the amount you pay each month to have health insurance.

How does a deductible work?

Deductibles may be low or high, depending on the plan you choose. With a high-deductible plan, you may pay less each month for your premium, but more for your out-of-pocket costs until you’ve hit 100% of your deductible, explains Gross. With the low-deductible plan, you pay more each month for your premium, but less of your out-of-pocket costs until you reach your deductible.

Whether you have a high deductible or a low one, you’ll want to plan to start each year by paying 100% of covered health care services until you meet your deductible. After you meet your deductible, you pay only a copayment or coinsurance for covered services. Those are fixed amounts you’ll pay for covered health services. For example, you might pay a $50 copay to see a specialist. Then your insurance company pays the rest for covered services.

You have some ways to save up, though, so you’re prepared to pay your deductible. Some health insurance plans, known as High Deductible Health Plans (or HDHPs) — plans that have higher deductibles but lower premiums than traditional ones — can be paired with a Health Savings Account, or HSA. That’s a type of health account you can only get if you have an HDHP.

With an HSA, you can set aside pretax dollars to help you pay your deductible for qualified medical expenses. Keep in mind that because HDHPs have a higher deductible, you’ll have to pay an annual deductible of at least $1,600 for an individual and $3,200 for a family.

Remember that all ACA health plans pay the full cost of certain preventive benefits. That includes preventive screenings for:

• Blood pressure
• Certain cancers
• Cholesterol
• Immunizations

That means you may not be charged, even if you haven’t yet met your deductible.

Have a high deductible or out-of-network costs? Hospital and doctor insurance can help.

What should I keep in mind when looking at deductibles?

As you shop for health care plans, there are a few questions you’ll want to keep in mind as you look at deductibles. These include:

• What services are considered preventive care? Many plans will pay for certain health care services, such as a checkup or condition management, before you’ve met your deductible. But you’ll need to check your plan’s details.
  
• Does the plan have separate deductibles for prescription drugs? You’ll want to figure out whether your plan’s prescription drugs have separate deductibles. And then you’ll need to factor that into your total potential out-of-pocket costs.
  
• Is there both an individual deductible and a family deductible? Family plans often have both. The individual deductible applies to each person, while the family one applies to all family members.
  
• Are your doctors, hospitals and drugs in network? Many plans require you to go in network, and if you go out of network, it won’t be applied toward your deductible. That means you may have to pay more for those out-of-network services.

You may also want to decide whether you want to sign up for an HDHP. If you’re generally healthy and don’t think you’ll have many health care costs in the next year, an HDHP may be right for you.

On the other hand, if you typically need regular health care, have a large family or a chronic condition, you may prefer a lower-deductible plan. You’ll pay more for your premium each month, but your overall out-of-pocket costs will be lower too, since you have a lower deductible.

What else do I need to know about my health insurance plan?

While the deductible is important, it’s not the whole picture. When choosing your plan, you’ll also want to think about the following:

• Your monthly premium. Multiply it by 12 to calculate how much you’ll pay in a year.
  
• Your copays and coinsurance. Like in the example above, will you be able to pay, say, a $50 copay every time you see a specialist? If you see them a lot, that can add up quickly.
  
• Your out-of-pocket maximum. This is the most you’ll have to pay for covered services in a plan year, before your insurance company pays for 100% for the rest of the plan year. You’ll want to make sure you can afford it.

Now that you know what your deductible is — and some other key health care terms — the next time you’re shopping for insurance, you’ll be more prepared. And that can make all the difference in finding the health plan that’s right for you.

HealthProtector Guard is a type of supplemental plan that helps cover costs even before you meet your deductible. Get the care you need when you need it. Call 1-844-211-7730 to compare plans.

This article contains information that is compiled by UnitedHealthcare or its subsidiaries. UnitedHealthcare does not represent all the information provided are statements of fact.

Sources:

Healthcare.gov: “Preventive care benefits for adults.” Retrieved from https://www.healthcare.gov/preventive-care-adults/ Accessed April 10, 2024

Internal Revenue Service. “Part III: Administrative, procedural, and miscellaneous.” 2023. Retrieved from https://www.irs.gov/pub/irs-drop/rp-23-23.pdf