Health Insurance Deductibles

The deductible on your health insurance plan is the amount you will personally have to pay towards care before your insurance company begins to contribute towards any costs associated with health care services. For example, if you have a plan with a $2,000 deductible, you will be completely responsible for the first $2,000 in medical care after which your carrier will begin sharing the costs of healthcare services. Deductibles are the primary means by which insurance providers help maintain lower premiums.

Unlike deductibles in other forms of insurance which work on a per incident level, deductibles for health insurance are applied on an annual basis and generally across all services with a few exceptions. The affordable care act also establishes a maximum deductible amount which is revised each year by Human Health Services. In 2015, the maximum deductible for an individual policy was $6,600 and $13,200 for a family. 

Choosing a Deductible Level

A higher deductible reduces the total costs that insurance companies are responsible for by shifting these costs to the consumer. As a result higher deductible plans will generally have lower premiums. Until these deductibles are met you are effectively not receiving any of the cost sharing benefits of having coverage. Understanding this tradeoff is vital in how you choose a plan. The deductible structure of a health insurance plan is important in deciding which plan you choose since it dictates when the carrier begins to actually pay. 

The two primary considerations when selecting a deductible are your ability to withstand risk and the amount you expect to spend annually on healthcare coverage. If you have non-trivial and recurring healthcare expenses choosing a deductible lower than the amount you spend is generally a good choice. This guarantees that you will meet the requirements necessary for the insurance company to provide benefits. The greater your costs exceed the deductible the greater proportion of the costs will be borne by the insurer. In such cases the added benefits will usually mean more than the additional cost in premiums.

For those people with low expected healthcare expenses, a cheaper plan with a higher deductible can make more sense. This lowers your guaranteed out of pocket costs by reducing the premiums you pay on a monthly basis. The only thing to consider is when selecting a plan is whether or not you have the financial means to cover the required deductible should an incident occur. 

Understanding Individual vs Family Deductible

Each health insurance plan will stipulate both an individual and family deductible, with the family deductible typically twice that of the individual. It is very important for households that have multiple family members covered under the same plan to understand how these two values dictate their cost sharing benefits. 

Beginning in 2016, deductibles for insurance plans will become "embedded." For each household the health insurance company will track the total amount paid in deductibles for the entire family as well as the amount paid toward deductibles for care of each individual in that family. The company will then begin to pay out benefits once one of two circumstances are met.

  • If any family member meets the amount set by the individual deductible, then the company will meet the cost sharing benefits for that individual and that individual only for the rest of the year. 
  • If the family as a whole meets the amount set by the family deductible then the family will begin paying out towards expenses for every family member for the rest of the year.

Medical vs Prescription Deductibles

Complicating matters when it comes to deductibles is that many insurance plans treat prescriptions differently than other services. Many plans split out prescription related costs into their own deductible category. In such cases a prescription deductible exists and is tallied separately from all other medical care. Policyholders for such plans will be required to pay for medication up to the amount specified before the plan covers these costs. For plans where a prescription deductible is not specified, cost sharing for medication will not begin to take affect until these requirements are met.

People that have a high proportion of their medical expenses driven by medical prescriptions may actually benefit from having a separate prescription deductible as these amounts are typically much smaller than their medical counterparts. Plans with an Rx deductible make it easier for someone with high prescription costs to begin receiving the cost sharing benefits offered by the policy.

Other Exceptions To Deductibles

While most cost sharing benefits only kick in once the deductibles have been met, health plans can and do make a few exceptions where copays come into effect beforehand. All plans are required to cover preventive care at zero cost to the consumer. Other exceptions to deductibles offered by plans include:

  • Copays on a set number of visits to primary care physicians. Many catastrophic and high deductible plans will allow patients to pay a low copay for PCP visits even before deductibles are met. A number of plans offer up to 3 visits to the PCP for a copay.
  • Generic drugs are also often excluded from the deductible requirement with an established copay applying at all times.

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