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How Does a Health Insurance Deductible Work?

In 2015 employees contributed a total of $4,698 to their monthly health insurance premium, deductible, coinsurance and copays. Nearly half of those costs was attributed to out-of-pocket expenses alone. That’s up from a total of $2,001 for all out-of-pocket costs in 2005. In 10 years, employee responsibility for healthcare costs has more than doubled.

There has been much discussion in the news media recently about the sharp increase in health insurance deductibles over the last decade, particularly for individuals and families that purchase a health plan on their own. The numbers continue to escalate along with health insurance rates. But what does a deductible actually do for you? How does it help? How does it hurt? We take a look.

Health insurance plans can have different structures which work in various ways, making it that much more important to review a health insurance plan in detail before committing to specific coverage. Here are some scenarios of how a insurance plan might vary.

  • You are responsible for all medical bills up to your deductible amount.
  • You are responsible for all medical bills up to your deductible amount, and then you must pay coinsurance for additional services {Example: 30% coinsurance after deductible amount}.
  • You are responsible for all medical bills up to your deductible amount, and then you must pay copays for additional services {Example: $250 copay for emergency room visits after deductible}.
  • You are responsible for all medical bills up to your deductible amount, you must pay a coinsurance percentage for additional services, and you have a separate prescription drug deductible.

Deductible Alone

Many times a health insurance plan will just have a deductible that you must meet before the health insurance carrier begins paying medical expenses, providing the most affordable healthcare option. If you know you will need a specific procedure during the year, look at the healthcare plan details for coverage based on hospital stay, surgery and specialist visits. A “deductible alone” plan may advertise, “No charge after deductible” for certain medical expenses. If you are healthy and have a deductible only plan, understand how much you might be on the hook for, should the unexpected happen.

Deductible Alone

Deductible Plus Coinsurance

Many times health plan details will list “30% coinsurance after deductible” for specific occurrences, like an emergency room visit or specialist office visit. That means that you have to pay up to the deductible amount first, and then are responsible for 30% of your medical bills for certain office visits or hospital stays. The plan details should outline this information, but you can always contact the customer service department of an insurance company to verify. If you anticipate having surgery or needing to see a specialist during the year and have a plan with coinsurance, add the additional percentage of costs into your final estimated out-of-pocket expenses for the year.

Deductible Coinsurance

Deductible Plus Copayment

A healthcare plan may require a deductible limit be paid first, and then additional services are paid with a flat rate copay. This arrangement can sometimes be more cost efficient than coinsurance, depending on the services used and the copay amount. Many times plans will co-mingle copays and coinsurance in the same plan, so if you anticipate going to the emergency room at least once a year, and that service has a flat copay price, estimate how much a similar plan with coinsurance might cost compared to the copay plan.

Deductible Copay

Medical Deductible and Prescription Drug Deductible

Health plans can help reduce the cost of prescription drugs, especially if you take expensive medications or specialty drugs. In addition, having a separate prescription drug deductible can lower the overall out-of-pocket costs for medications during the course of a year that would normally be quite expensive. For individuals who don’t anticipate major medical procedures during the year but take medication, not being forced to meet your medical deductible in order to acquire drug savings can be an added bonus.

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The views expressed here are those of the author and do not necessarily represent or reflect the views of Healthcare, Inc. and HealthCare.com.

Colleen McGuire

About Colleen McGuire

Colleen McGuire is an independent consultant who has spent most of her career writing about healthcare and the health insurance industry. For fun she blogs, travels and takes a lot of pictures along the way.

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