How Does a Deductible Work?
When you’re shopping around for plans, one of the terms that you see most often is “deductible.” Some plans have high deductibles, some have lower ones, but they usually all have them. You have to pay a premium each month to keep coverage, but what does it mean when you have, for example, a $1500 deductible to meet in addition to that monthly premium?
A deductible is the amount you pay out-of-pocket for covered services before your health insurance plan will begin to pay for your services. Let’s say you go for the plan with the $1500 deductible. That means that you will have to pay for any medical services you need until the amount you’ve paid equals $1500. Once you hit that amount, your health insurance plan will start paying its share
Plans with a higher deductible tend to have lower monthly premiums, and plans with lower deductibles tend to have higher monthly premiums. There are pros and cons to each of these types of plans, and each one is suited to different types of people. For example, if you are relatively young and healthy and don’t think that you’ll spend enough on healthcare to meet your deductible for the year, then you might want to save money on your monthly premiums and choose a high deductible health plan. Qualified HDHPs also offer you the option to contribute money to a health savings account (HSA). These accounts allow you to put aside money on a pre-tax basis to use for qualified medical expenses like copays, prescription medications, and even glasses.
Plans with lower deductibles and higher premiums, on the other hand, are usually recommended for people who think that they are going to access more healthcare services throughout the year. This includes people with young children or those with chronic health conditions. If you tend to rack up a lot of medical expenses, then you’ll quickly meet your low deductible and your insurance will start paying its share, making your higher monthly premiums worth the cost.
What’s the Difference Between a Copay and Coinsurance?
Your out-of-pocket expenses don’t end with your deductible. There are also copays and coinsurance. Copays are set amounts that you have to pay to your medical provider every time you see them. For example, your plan may have a $20 copay to see your primary care physician for a non-preventive service and a $50 copay to see a specialist. That amount is set by your plan and needs to be paid for every visit, whether or not you’ve met your deductible.The only exception to this is for preventive care visits, including things like annual checkups, well-woman visits, many immunizations, and certain screenings.
Coinsurance, on the other hand, only comes into play after you’ve met your deductible. Once you’ve met your deductible, your plan will begin to cover a percentage of your medical costs – but it usually won’t cover all of it. Coinsurance is the percentage of your costs that you are responsible for paying. For example, if you have an 80/20 plan, that means your insurer will cover 80% of costs and you will pay 20% until you reach your out-of-pocket maximum for the year. Remember, your plan will only pay for 80% of covered services; if something is not covered by your plan, you’ll have to pay the entire bill.