What is a health insurance deductible?

Allow us to define deductible: Your health insurance deductible is the amount you must pay before the health plan starts paying for your covered care. For example, if your deductible is $5,000, your plan won't pay for some services until you've paid $5,000. When it comes to paying for your health insurance there are three primary components: your deductible, your coinsurance and your monthly premium. The deductible is an important, yet often misunderstood piece of the healthcare puzzle.

However, all Health Insurance Marketplace plans and many other plans must cover certain preventive services without charging you a copayment or coinsurance . This is true even if you haven’t met your yearly deductible.

Deductible vs Out-of-Pocket
Here is an example of how the deductible, coinsurance and maximum limit you would need to pay work together.

You have an insurance plan that has a:

  • $5,000 deductible
  • 20% coinsurance
  • Out-of-pocket maximum of $6,000

This means:

  • You must pay the first $5,000 of most of your health care costs.
  • After that, your plan pays 80% of the costs, and you pay the other 20% (coinsurance).
  • When the amount of coinsurance you've paid reaches $6,000, the plan covers 100% until your "plan year" renews. A plan is active for one year at a time.
  • At the start of each year, your deductible and coinsurance resets for the next plan year and the $5,000 deductible and 20% coinsurance starts again.

What is the right deductible for you?
In most cases, the higher your deductible, the lower your monthly premium, and the lower the deductible, the higher the premium. This is one of the questions you should ask yourself before buying health insurance.

If you know you'll be using your insurance often, you may want to choose a plan with a higher premium and lower deductible. This means you'll pay more each month, but the amount you pay when you go to the doctor will be less during the year.

On the other hand, if you know you won't use your insurance very much, you may want to choose a plan with a lower monthly premium and higher deductible. This way you keep your monthly costs down by taking the chance that you may not need to pay your deductible.

We know it gets a bit confusing, so if you still have questions, ask us below!

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