The importance of understanding how deductibles work for health insurance

Jun 18, 2017 (0) comment

how deductibles work for health insuranceLearning how deductibles work for health insurance is important information to know when choosing a health insurance plan.  However, it can get confusing.  To help clear up the confusion associated with deductibles, here is the definition of what a health insurance deductible is:

A deductible is defined as the amount of financial responsibility you, the policy holder, need to pay out of pocket before the insurance company will help you pay any expenses.

Until you meet your health insurance deductible, your insurer will require you to pay for some, if not all, of your medical bill.  Understanding how deductibles work for health insurance is vital information to know when preparing for an expensive medical procedure like surgery.  Waiting to schedule a surgery, or other expensive procedure, for when you meet your deductible can save you thousands of dollars.

The importance of understanding how deductibles work for health insurance

Saving money is an incredibly important part of life.  Never is that more important than when it comes to your healthcare.  Before you choose a health insurance plan, understanding how deductibles work for health insurance is a great way to prepare for the inevitability of utilizing the protections of your health insurance policy.

How do you meet your annual health insurance deductible?

Under the Affordable Care Act, there are four plans to choose from: Platinum, Gold, Silver, and Bronze.  The deductibles for these plans can range from a high of $5,500 to there being no deductible at all.  This is where there is a balancing act when it comes to costs.  In order to keep their monthly premiums low, many individuals will chose a high deductible plan ($5,000-$5,500).  The plans with zero deductibles have a much higher monthly premium, however, they do not have to pay any deductible.  Examples of these types of plans would be Platinum and Gold plans.  Individuals will chose a plan with no deductible because they may to use their plan regularly.  The “middle of the road” plans are the Silver plans and are the most popular.  The deductibles for Silver plans can range from $1,250 to $2,000.  Since health insurance is a little volatile today, we provided you with a chart below that provides a visual summarization of how monthly premiums and deductibles cost for each plan.

Let’s say you chose a plan with a $2,000 annual health insurance deductible.  As you pay for tests (lab work), x-rays, procedures, or visits to the ER, you are gradually increasing the amount of money that will be applied to your annual health insurance deductible.  The important thing to note is that not all services are applied towards your health insurance deductible.  For example: not all doctor visits are applied toward your annual health insurance deductible. Over the course of the calendar year, you gradually accrue money to meet your health insurance deductible.  Once you meet your $2,000 health insurance deductible, your insurer will start to pay varying percentages.  Of course, you will still have a copay of 25%-35% of total hospital bills, fortunately, it wont be for the entire bills balance.

What happens if you need to have a procedure, but you haven’t met all of your $2,000 health insurance deductible.

Does this mean you have to pay for the entire procedure out of pocket?  After doctor fees, facility fees, and anesthesia fees, some medical procedures can range between $20,000 – $60,000.  If you haven’t meet your health insurance deductible, it can be easy to become concerned at the possibility of having to pay for that entire procedure out of pocket.  Fortunate for you, any procedure counts towards your health insurance deductible and we will explain how this works below.

How much I have to pay for a procedure if I haven’t meet my health insurance deductible?

Believe it or not, this is very easy to explain.  All the hospital will do is take the mount you have accrued towards your health insurance deductible and subtract it for your health insurance plan’s $2,000 deductible. Below are three examples of how that plays out.

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Example A

health insurance deductible

Since you have accrued $0 towards your health insurance deductible, the first thing the hospital will do is subtract your $2,000 policy deductible and set it aside for you to pay in full.

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Example B

health insurance deductible

Since you have accrued $1,000 towards you health insurance deductible, the hospital will subtract that $1,000 from your $2,000 health insurance deductible.  The hospital will set aside the final $1,000 for you to pay in full.

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Example C

health insurance deductible

Since you have accrued $1,800 towards you health insurance deductible, the hospital will subtract that $1,800 from your $2,000 health insurance deductible.  The hospital will set aside the final $200 for you to pay in full.

Now that you have meet your annual health insurance deductible, you will need to understand your coinsurance (25% to 35% of hospital bill)

Since your $2,000 health insurance deductible has finally been met through your procedure, your insurance plan will cover between 65% – 75% of the remaining bill.  Leaving you with the remaining 25%-35%, depending on your health insurance plan.  Thankfully the bill will not be for the full balance.  Hence, the whole reason we all have insurance in the first place.

To recap:

  • You gradually accrue money towards you health insurance deductible through tests (lab work), X-rays, procedures, or visits to the ER.
  • Most insurance policies will not cover most procedures until your health insurance deductible has been met.
  • Once your health insurance deductible has been met, your insurance company will pay either 65%-75% of your total hospital bill

We hope this has helped you better understand how deductibles work for health insurance.  If you still need to get health insurance and would like to learn more, feel free to go to our Health Insurance page.  There you will understand what information you will need to get enrolled and how you can contact us.

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