Group and Private Insurance

A health insurance deductible is one of the most important aspects of a health insurance policy. To a large degree the size of your deductible controls your price. Understanding what a deductible is and how it is applied on any policy you are considering is important if you are going to make the right decision when looking to buy health insurance.

I have put together a video which answers the question What is a deductible for health insurance? Please click if you’d rather watch than read.

Not all expenses are subject to the deductible in every policy. In some policies, doctors’ visits and prescriptions are only subject to co-pays. However, don’t assume that this is the case for all policies because it isn’t. Many policies make everything subject to your deductible.

The amount of your deductible is the amount you will pay before your insurance company pays its share for medical expenses that are subject to your deductible.

If you have a $1,000 deductible and $2,000 worth of medical expenses, you will pay $1,000 before the insurance company opens its purse. The insurance company may or may not pay the remaining $1,000 in full. This depends on whether you have coinsurance on your policy. The remainder may be subject to coinsurance. If it is and your coinsurance percentage is 20%, your insurance company will pay $800 and you will pay a total of $1,200.

Your health insurance deductible is probably based on a year’s worth of expenses. This means that your $2,000 worth of expenses could have been the sum total of several doctors’ visits or one hospital visit.

The deductible-year may begin on January first. It may begin on your policy’s effective date or the anniversary of that date.

Knowing when your deductible-year begins is important when it comes to timing planned medical expenses. If you are nearing the end of your deductible year, you may want to delay going to the doctor for non urgent issues if you are a long way from meeting your deductible. By putting the cost of a non-urgent medical treatment or exam on next year’s deductible, you increase the chances of meeting your deductible next year. Of course the reverse is true. You may want to have your next medical visit earlier rather than later if you have already met your deductible for this year.

You pay for any expenses that are subject to your deductible. This means that your insurance company doesn’t pay for these things and will give you a lower price if you opt for a higher deductible.

However the difference in price isn’t usually proportionate to the difference in deductible. When you get a lower deductible you may wind up paying an extra $100 for each additional $50 worth of insurance. For this reason medium and high deductible policies are often the best buys.

Some insurance policies will have low deductibles and very high co pays or coinsurance. For this reason many zero deductible policies are misleading to consumers. And for this reason you should understand how those other cost-shares impact health insurance policies.

My next posts will cover those two subjects.