What Are Health Insurance Deductibles?

When you begin your search for affordable medical coverage, you need to determine what your health insurance deductibles will be when you sign up for a plan.


What are Health Insurance Deductibles?

A deductible is the amount you must pay for medical services before your health insurance coverage takes effect (similar to car insurance deductibles). For instance, if your deductible is $1,000 for the year and you get a hospital bill for $4,000, you are responsible for paying the first $1,000 out of pocket and your insurance company will cover the rest. But you may also incur additional fees if your health plan includes you paying a percentage of all hospital stays. Many plans have an 80/20 arrangement. They pay 80% of "reasonable costs" and you pay the other 20%. Reasonable costs are determined by your insurance company. Deductibles can range from $1,000 to as high as $5,000. Usually, the higher your deductible, the lower your monthly premiums will be. Adversely, a lower deductible means higher premiums.

Deductibles are a way for insurance companies to offset their costs. That's why higher deductibles mean lower premiums for the policy holder.

Health insurance deductibles may vary within a policy. You may have a $1,000 deductible for surgery or hospital stays, but your deductible for prescription medications or physical therapy services may be much lower.


What Are Co-payments ?

Some health plans require a co-payment for a doctor visit, xray, MRI, prescriptions, hospital stays, and other various services. It can be as little as $5 or as much as $250, depending on the type of service, your monthly premiums, and the benefits of your plan. These fees are not associated with your deductible. Under most plans, you can't apply your co-payments to meet your deductible.

What Are Premiums?

Premiums are the monthly, quarterly, or annual fee you pay to remain insured under your health insurance policy. Usually, the lower your fees are the less coverage you will receive, or the higher your deductible will be.

How to Choose a Health Insurance Plan

First, determine what you are willing to pay. If you have a spouse and children you will end up paying more.

How much are the premiums, deductibles, and the co-payments?

Can you afford the deductibles? (the amount you have to pay before your insurance coverage takes effect)

If you take a lot of prescription medications, is there a high deductible or co-payment?

If you choose a PPO or POS, check their list of hospitals within the network to determine if they are acceptable to you.

There are many things to consider before buying individual health insurance. Compare benefits and options before making a decision.