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Health Insurance Deductible 101

Health Insurance Deductible 101

What Is a Deductible … and How Does It Work?

Welcome to Health Insurance Deductible 101. It’s time to get to know one of your health plan’s key components and better understand how health insurance works.

If you have an Obamacare plan, you have a deductible. If you are among the 20 million people who have gained health insurance coverage because of the Affordable Care Act, the concept of a deductible might be new to you.[1] Even if you’ve had health insurance before, you may be a little uncertain about deductible basics—a lot of us are murky on the topic.

In a 2015 survey of young adults aged 19 through 30, half of the participants couldn’t define “deductible.”[2] Another survey found that nearly a quarter of individuals newly enrolled in health insurance plans didn’t understand what the term “deductible” meant—close to half of those who did not enroll didn’t understand it.[3]

Introducing your health insurance deductible

Let’s start with a basic definition. A health insurance deductible is the dollar amount that an insured individual or family must pay for covered healthcare services each year before their plan benefits fully take effect.[4]

 

How a deductible works

You pay out of pocket for covered healthcare services until you reach your plan deductible.

Here’s an example[5]:

Sam buys a bronze plan. The plan details list the individual, in-network provider deductible as $5,500.

Sam feels ill. She goes to her primary care doctor for a visit, presents an insurance card and pays her plan’s office visit copay.

This was Sam’s first time using her health insurance this year. As such, she has not yet paid anything toward her deductible and her coinsurance has not yet kicked in. She receives a bill of $150 for the visit.

After Sam pays her $150 bill, her remaining deductible amount is $5,350.

Let’s say Sam continues to receive medical care throughout the year and pays her deductible down to a zero balance. She gets a rash and goes to the doctor to have it checked out. The total charges for the visit and allergy testing are $300.

Þ   The coinsurance amount in Sam’s health plan once she reaches her deductible is 0 percent.

Þ   That means she owes nothing for the care received.

Þ   The $300 balance is covered by her health insurance benefits.

Some plans may cover certain services before you reach your deductible. Read your policy information for specifics and/or contact your health insurance provider with questions about your benefits.

 

 

Difference between a deductible, copayment, coinsurance and out-of-pocket limit

Whereas a deductible is the amount you pay for healthcare before your plan benefits take effect, a copayment (i.e., copay) is a flat fee you may have to pay at the time you receive healthcare. Your plan may have an office visit copay and a separate, urgent care copay, among others.  Finally, coinsurance is the percentage of covered healthcare costs you pay after your deductible has been met.

These are basic definitions. You can read more in our article “What is the Difference Between Coinsurance, Copay and Deductible?” And, as always, consult your health insurance policy or contact your health insurance company regarding your plan benefits.

Are there different types of deductibles?

Yes. You will have an:

  • Individual or family deductible, depending on whether or not you have an individual or family plan
  • In-network and out-of-network deductible—separate deductibles for care received by network providers or out-of-network providers

Your plan may also have a separate prescription drug deductible.

What is considered a high deductible?

Each year, the Internal Revenue sets guidelines for what is considered a high deductible health insurance plan.

For calendar year 2017, the IRS defines a high deductible plan as one with an annual deductible of no less than[6]:

  • $1,300 for self-only coverage
  • $2,600 for family coverage

Furthermore, the plans’ annual out-of-pocket expenses cannot exceed the following amounts[7]:

  • $6,550 for self-only coverage
  • $13,100 for family coverage

The IRS has announced that these guidelines will increase in 2018, defining a high deductible health plan as one with an annual deductible of no less than $1,350 for self-only coverage and $2,700 for family coverage.[8] Out-of-pocket maximums will increase to $6,650 for self-only coverage and $13,300 for family coverage.

When you can’t afford your Obamacare plan deductible

It may seem counterintuitive, but buying additional insurance coverage could help if you have a high deductible health insurance plan. Supplemental health plans can help reduce your out-of-pocket healthcare expenses.

Medical gap plans pay a lump sum benefit when a covered accident or illness occurs, and you can use the payment toward your Obamacare deductible, household expenses, childcare and more.

 

How much is a medical gap plan?

 

Telemedicine can help reduce the cost of care when you need to see a doctor and can also save you the time of traveling to and waiting at a clinic. The Telemedicine bundle available through healthedeals.com allows you to receive telehealth consultations for minor ailments such as a cold, sinus infections, allergies, pink eye and more—just $15 per consultation.

 

Telemedicine starts at $12.50 per month

 

Consider the deductible when choosing your health insurance benefits

In general, the lower a health insurance plan’s monthly premium is, the higher its deductible is—and vice versa. It can be tempting to focus on premium, but it is important to consider your potential out-of-pocket responsibility if you need medical care.

The next time you shop for health insurance, be sure to look for coverage that strikes a balance between a premium you can afford and out-of-pocket costs that you can pay. Consider how much healthcare you need in a typical year and if you had a large claim whether or not you could pay out of pocket until your benefits took effect.

Working with a health insurance producer can help you find the right Obamacare plan and supplemental coverage for your budget and health. Call the number at the top of your screen to speak with a certified advisor who can answer your questions and assist you.

 

Originally posted May 16, 2016


Legal Disclaimers

[1] U.S. Department of Health and Human Services. “20 Million People Have Gained Health Insurance Coverage Because of the Affordable Care Act, New Estimates Show [Press Release].” March 3, 2016. http://www.hhs.gov/about/news/2016/03/03/20-million-people-have-gained-health-insurance-coverage-because-affordable-care-act-new-estimates

[2] Singh, Maanvi. “Defeat By Deductible: Millennials Aren’t Hip to Health Insurance Lingo.” NPR Morning Edition. June 16, 2015. http://www.npr.org/sections/health-shots/2015/06/16/414665468/defeat-by-deductible-millennials-arent-hip-to-health-insurance-lingo

[3] Filipic, Anne. “Silver Plans, Deductibles, and Co-Insurance, Oh My! Why Health Insurance Literacy is Critical for Enrolling and Retaining Millions in Coverage.” Enroll America. Sept. 15, 2014. https://www.enrollamerica.org/blog/2014/09/health-insurance-literacy-critical-enrollment-retention/

[4] Centers for Medicare and Medicaid Services. “Glossary of Health Coverage and Medical Terms.” Accessed May 11, 2016. https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/UG-Glossary-508-MM.pdf

[5] Example based on HealthCare.gov Bronze plans available to a 28-year-old woman in Ohio. Rates access on May 13, 2016. https://www.healthcare.gov/see-plans/#/plan/results/33931OH0030009/details

[6] Internal Revenue Service. 26 CFR 601.602: Tax forms and instructions. Rev. Proc. 2015-30. https://www.irs.gov/pub/irs-drop/rp-15-30.pdf

[7] Ibid.

[8] Mayer, Kathryn. “IRS Announces Bump in 2018 HSA Limits." Employee Benefit Adviser. May 10, 2017. https://www.employeebenefitadviser.com/news/irs-announces-bump-in-2018-hsa-limits