A deductible is the amount you pay for healthcare services before your health insurance coverage kicks in. With a high deductible health plan (HDHP), you pay a higher deductible amount before the insurance company starts to cover costs.
Understanding how deductibles work is key to choosing the right health insurance plan.
How Does a Health Insurance Deductible Work?
A deductible is the amount you owe for healthcare services before your health insurance plan starts to pay. For example, if your deductible is $1000, you pay the first $1000 of medical bills yourself. After reaching your deductible, you start sharing costs with your health insurance company through copays or coinsurance.
Deductibles reset each year on January 1st. So if your deductible is $1000 and you spent $500 on medical care in 2021, that $500 doesn’t carry over to 2022. You would need to spend $1000 again in the new year before insurance kicks in.
Some services like preventive care may be covered by insurance before you meet your deductible. Check your policy to see what’s included.
What is Considered a High Deductible Health Plan?
A high deductible health plan (HDHP) has a higher deductible amount than a traditional insurance plan. For 2023, the IRS defines a high deductible health plan as any plan with a deductible of at least:
- $1,500 for an individual
- $3,000 for a family
HDHPs typically have lower monthly premiums than traditional plans but you pay more out-of-pocket before coverage starts.
Pros and Cons of High Deductible Health Plans
Pros:
- Lower monthly premiums
- May qualify to open a Health Savings Account (HSA)
- Coverage for preventive services before deductible
- Catastrophic coverage protection
Cons:
- Higher upfront medical costs
- Need savings for unexpected medical bills
- Less coverage for frequent healthcare usage
- High prescription drug costs pre-deductible
HDHPs work best for those who rarely need medical services or those with savings to cover the deductible if needed. The lower premiums provide financial benefit for healthy individuals.
Those with chronic conditions or who need frequent healthcare services may want a lower deductible plan despite the higher premiums.
How Much are Deductibles on Health Insurance?
Deductibles can vary widely on health insurance plans. On average, 2023 deductibles are:
- Employer Provided Plans: $1,834 for individual coverage or $4,079 for family coverage
- Marketplace Plans: $4,245 for individual Bronze plans or $9,213 for family Bronze plans
Catastrophic health plans have the highest deductibles but the lowest monthly premiums. For 2023, deductibles on catastrophic plans are up to $9,100 for an individual or $18,200 for a family.
Some employers fund a portion of the deductible in Health Reimbursement Arrangements (HRA) or Health Savings Accounts (HSA). This lowers the amount you need to pay out-of-pocket before insurance coverage kicks in.
What Medical Expenses Apply to the Deductible Health Insurance?
Any care from in-network providers that you pay for out-of-pocket counts towards your annual deductible. This includes:
How Do You Get Deductible Health Insurance?
- Hospital stays
- Doctor office visits
- Lab tests
- X-rays
- Emergency room visits
- Prescription drugs
- Medical equipment
- Once you hit your deductible amount, you start sharing costs with your insurance company. Some plans have copays for services while others have coinsurance percentages.
- Out-of-network care may not apply to your deductible. Some plans provide no coverage for out-of-network providers. Others have separate deductibles for in-network vs out-of-network care.
- Strategies to Plan for High Deductible Health Plans
- A high deductible plan can provide savings, but you need strategies to cover unexpected medical costs. Consider these tips:
- Contribute to an HSA: An HSA lets you save and invest pre-tax funds to pay for medical costs. If eligible, maximize contributions.
- Use Preventive Care: Most HDHPs cover preventive services like checkups before deductible. Use these to stay healthy.
- Know Your Costs: Ask for cost estimates beforehand for big procedures. Shop around and compare prices.
- Have an Emergency Fund: Save 3-6 months of living expenses to cover high or unexpected medical costs if needed.
- Consider Supplemental Insurance: Accident, critical illness or hospital indemnity plans can help cover deductible costs.
- The key is planning ahead and understanding how much you may need to pay out-of-pocket for any medical care when you have a high deductible plan. Take advantage of preventive care and tax-savings to help offset costs.
- Frequently Asked Questions About Deductible Health Insurance
- How does a deductible work with coinsurance?
- Once you meet your deductible, you start paying coinsurance, which is your share of costs with insurance. For example, with a 20% coinsurance, the plan pays 80% of approved charges and you pay 20% out of pocket.
- Are doctor visit copays included in deductible?
- Typically copays for services like doctor visits or prescriptions don’t count towards your annual deductible. You pay the flat copay amount upfront rather than a coinsurance percentage.
- Do deductibles reset every year?
- Yes, deductibles reset to zero every year, usually on January 1st. Any amount you paid the previous year does not carry over or count towards the next year’s deductible.
- Are all health plans required to have a deductible?
- No. Some health plans have no deductible and start covering services right away with fixed copays. However, these plans have higher monthly premiums to make up for the lower upfront costs.
- What is the average individual deductible for 2023?
- For employer-based plans, the average 2023 deductible is $1,834 for an individual and $4,079 for a family. Marketplace plan deductibles average $4,245 individual and $9,213 family for Bronze plans.
- In summary, a deductible is the amount you pay out-of-pocket for healthcare before your insurance kicks in to cover costs. Understanding how deductibles work allows you to pick the right health plan based on your expected medical usage and budget. Compare all costs of plans, not just the deductibles, when making your coverage decision.