what does deductible mean in health insurance

A deductible in health insurance is the amount you must pay out of your own pocket for covered medical services each year before your health plan starts sharing the costs.

Simple definition

• A deductible is a set dollar amount (for example, 500, 1,000, or 7,000) you pay for covered care before the insurance company begins to pay its share.

• Until you hit that deductible, you generally pay the full “allowed” cost for most services (after any network discounts your plan has negotiated).

Quick example

• Suppose your plan has a 1,000 deductible and you get a covered procedure that costs 2,000 under your plan’s allowed amount.

• You would pay the first 1,000; once that deductible is met, the insurer typically starts paying a portion of further costs for the year, and you pay the rest through copays or coinsurance.

How it fits with other costs

• Your monthly premium is what you pay just to keep the policy active, while the deductible is what you pay when you actually use care, before cost-sharing kicks in.

• After the deductible, you usually pay copays (fixed amounts, like 30 per visit) or coinsurance (a percentage, like 20% of the bill) until you hit your plan’s out-of-pocket maximum, after which the plan may cover 100% of covered costs for the rest of the year.

High vs. low deductibles (today’s context)

• High-deductible health plans (HDHPs) have larger deductibles but lower premiums, and are often paired with Health Savings Accounts (HSAs), which has made them increasingly common in the last several years.

• Lower-deductible plans usually have higher premiums but mean you start getting help from insurance sooner when you use care, which some people prefer if they expect a lot of medical expenses.

TL;DR: A health insurance deductible is the annual amount you pay for covered services before your plan starts paying its share of the bill.