Health Insurance Deductibles 101

Sarah Sullivan
August 6th, 2019 August 6th, 2019 |
Read time: 7 minutes

Products mentioned in this blog post:

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What is a Health Insurance Deductible + How Does it Work?

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 major medical insurance, whether you purchased an individual policy or are enrolled in an employer’s group plan, you have a health insurance deductible.

You may be a little uncertain about deductible basics – it turns out a lot of us are.

A 2016 survey (Policygenius) identified four key health insurance terms necessary for a basic understanding of healthcare: deductible, coinsurance, copay and out-of-pocket maximum.1

Apparently, just 4% of Americans were able to correctly define all four terms!2 After reading this blog post, you can count yourself among an elite few…

In addition to defining “deductible,” we’ll cover:

  • How a health insurance deductible works
  • What doesn’t count towards your deductible
  • What’s an average deductible? What about a high deductible?
  • Options that may help if you have a high deductible

Deductible Definition

A health insurance deductible is the amount you pay annually for covered healthcare services before your insurance starts to pay (healthcare.gov).3

Can you afford your medical deductible if you get sick or injured?

If not, consider supplemental health insurance. (Quote and apply online in minutes.)

Get a Gap Health Insurance Quote

How a Health Insurance Deductible Works

Let’s look at a quick example:

If your plan has a $1,000 annual deductible and you use a covered healthcare service that costs $200, you’ll pay $200 fully out of pocket and have $800 remaining for your annual deductible.

Preventive Care Not Subject to Deductible
Some plans, like ACA-qualifying major medical insurance, cover certain services before you reach your deductible and all ACA health plans pay the full cost of certain preventive care before you meet your deductible.4

You’ll continue to pay for covered services until you’ve paid $1,000 out of pocket.

After that, your insurance policy will begin to pay a portion of your covered services based on your coinsurance and copay.

You’ll continue to share costs with your insurance company until you’ve reached the annual out-of-pocket maximum. For 2019, the out-of-pocket limits for ACA-qualifying major medical insurance are $7,900 for an individual plan and $15,800 for a family plan.5

After the out-of-pocket limit has been met, the insurance company will pay 100% of covered healthcare costs for the remainder of the year.

When the next plan year starts, your deductible and out-of-pocket maximum reset to $0.

Learn more about health insurance cost sharing (coinsurance, copay, deductible and out-of-pocket maximum).

Infographic Example

What Doesn’t Count Towards Your Deductible?

Insurance costs that don’t count towards your annual deductible are:6

  • Services or medical supplies not covered by your policy even if they were recommended by your in-network primary care physician or a specialist.
  • Services performed by out-of-network providers unless you obtain a network exception.
  • Copayments and coinsurance typically do not count towards your annual deductible, though they do count towards your annual out-of-pocket maximum.
  • Premiums are not considered an out-of-pocket cost but a healthcare expense and as such do not apply to your annual deductible.

Learn more about health insurance networks and avoid paying too much for medical care.

Different Types of Deductibles

Not all deductibles are the same, and you may have more than one type associated with your policy, including:

  • Individual or family deductible – Family plans can have both individual deductibles that apply to each person and a family deductible that that applies to the entire family covered on the policy.7
  • In-network and out-of-network deductible – Separate deductibles for care received by network providers or out-of-network providers. Often times, the out-of-network deductible is higher.8
  • Prescription drug deductible – This is a separate deductible amount that is applicable to prescription drugs and must be met before pharmacy benefits apply.

Want help with your health insurance deductible?

Consider supplemental health insurance. (Quote and apply online in minutes.)

Get a Gap Health Insurance Quote

Deductible Costs — What’s Normal?

Deductible costs vary between group medical plans (those offered by employers) and individual or private major medical plans.

Group Medical Plans

According to Kaiser Family Foundation’s (KFF) annual employer benefits survey, the average deductible for a worker in an employer’s group plan in 2018 was $1,573, an increase of 4.5% from 2017.9

The same survey indicated that health insurance costs are a growing problem for employees with group health plans since their cost sharing has risen much faster than wages in recent years:10

  • Deductibles have risen by 212% between 2008 and 2018, while wages have only risen 26% during that same period.11
  • 26% of all covered workers in 2018 are enrolled in plans with an annual deductible of at least $2,000, which is up 22% from 2017.12

Learn about your options if your employer health plan is too expensive.

Individual Major Medical Plans

The deductible outlook is even more grim if you’re purchasing unsubsidized individual major medical insurance on your own.

In 2019, the average unsubsidized medical deductibles for ACA plans both with separate and combined medical and prescription drug deductibles are as follows:13

Metal Level 2019 Combined Deductible 2019 Separate Deductibles
Bronze $6,258 $5,977
Silver $4,375 $4,043
Gold $1,335 $1,581
Platinum $48 $365

Learn about your options if your individual ACA major medical plan is too expensive.

High Deductible Health Plans

While any out-of-pocket deductible costs may seem relatively high to us as consumers, the Internal Revenue Service (IRS) actually sets annual guidelines for what is legally considered a high-deductible health insurance plan (HDHP).

These guidelines may not be important to you unless you plan to purchase a health savings account (HSA), in which case you must also purchase an HSA-qualified high-deductible health insurance plan that meets the following criteria. Learn more about HSAs.

For calendar year 2019, the IRS defines a high-deductible plan as one with an annual deductible of no less than:14

  • $1,350 for self-only coverage
  • $2,700 for family coverage

Also, the plan’s annual out-of-pocket maximum cannot exceed the following amounts:15

  • $6,750 for self-only coverage
  • $13,500 for family coverage

Want help with a high deductible?

Supplemental health insurance may help. Quote and apply online in minutes.

Get a Gap Health Insurance Quote

Factor in Deductibles When Comparing Health Insurance Options

In general, the lower a health insurance plan’s monthly premium, the higher its deductible and vice versa. It can be tempting to focus on just the premium since that’s the bill you face every month, but it’s important to consider your potential out-of-pocket responsibility if you actually require medical care.

You typically won’t know what treatment will cost until after the fact. The subsequent medical bills could be less than $100 or up into the thousands or even more. If you have not yet met your deductible and used your coverage, these bills will likely be entirely your responsibility.

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 were to have a large claim, possibly one that used your entire deductible amount, whether or not you could pay out of pocket until your benefits took effect.

For more help assessing major medical plan deductibles and premiums, learn more about ACA metal levels, or contact a health insurance agent at 888-855-6837 to discuss your options.

What if You Can’t Afford Your Insurance Deductible?

It may seem counterintuitive, but buying additional insurance coverage could help if you have a high deductible by providing you additional benefits.

Gap health insurance pays a lump sum benefit when a covered accident or illness occurs, and you can use the payment toward your major medical deductible, household expenses, childcare and more. Premiums are generally affordable and there is no deductible for this type of policy.

Get a Gap Insurance Quote

 

Hospital indemnity insurance helps pay for the costs associated with being hospitalized, including hospital room and board, inpatient physician visits, and inpatient surgery. This type of coverage pays a fixed indemnity benefit regardless of what you’re charged for medical services. You can then use the benefit to help pay your major medical policy out-of-pocket costs. Learn more about fixed indemnity coverage.

Get a Hospital Insurance Quote

 

Telemedicine may help with costs for routine ailments like sinus infection, cold and allergies (especially if you find yourself at urgent care on a semi-regular basis with young children). Telemedicine can be a nice add-on to your healthcare coverage, however it is not insurance.

Get Telemedicine

Summary + Next Steps

Health insurance policies and terminology can be confusing, but hopefully now you have a better understanding of what a health insurance deductible is and how it works.

You also learned about some options if you have a high deductible health plan, including:

If you have questions or want to discuss your options with a professional, call 888-855-6837 to speak with a licensed agent.

You can also find an agent near you if you’d prefer to work with someone locally.

Need Supplemental or Short Term Insurance?

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  • Compare multiple plans
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Originally Published On May 16th, 2016
Independence American Insurance Company, Madison National Life Insurance Company, Inc. and/or Standard Security Life Insurance Company of New York may underwrite the products referenced on this website. Legal Disclaimers.

Footnotes