When you sign up for a health insurance plan, there are fees that accompany the policy. These fees are premiums, copays, and deductibles. While copays aren’t cheap, the deductible and monthly premiums are the more expensive costs. For now, we’ll focus on the deductible portion, and how it works.
Your deductible is what you pay out-of-pocket before your health insurance covers those high medical expenses for the rest of the year.
By the “rest of the year,” we mean that your payments renew annually. So it is important to know how to meet your deductible before it renews, when it renews, and what happens after you meet your deductible.
What Counts Towards Your Deductible
If you don’t know what counts toward your deductible, you might find yourself throwing money in the wrong direction. Avoid surprises down the line by reviewing these tried and true principles:
- Any payment out-of-pocket that is:
- on medically necessary services
- that are covered by your plan
- and within network.
If you have to have a procedure done, you must meet your deductible first for the company to pay the rest of the expenses. For example, if you need surgery that will rack up $25,000, then you must pay your deductible of $2,000 first and then the insurance company will cover the rest of the $23,000.
- If you have coinsurance, then you must pay off your deductible of $2,000 first, and the coinsurance amount. Then the health plan will pay the rest.
What Does NOT Count Towards Your Deductible
There are a few things that do not go towards your yearly deductible such as:
- Copays to the doctor or emergency room do not count towards your deductible. This will only count towards your maximum out-of-pocket limit.
- Coinsurance does not count towards your deductible, only out-of-pocket maximum.
- Monthly premiums do not count towards your deductible; it is just the cost of buying insurance and paying for part of the financial risk of potential health care expenses you create.
- Out-of-network services will not go towards your deductible because it is not covered within the plan, as well as any money that you pay out of pocket for any service not covered by your insurance plan.
Out-of-Pocket Maximum & Annual Renewal
Even after you meet your deductible, there are still situations (like extra payments) that you need to know about to avoid.
For example, if you have a coinsurance policy in your plan, you will not have to pay an endless amount of coinsurance payments, because there is an end called the out-of-pocket maximum.
An out of pocket maximum is basically how much you are allowed to pay, and then the insurance company must pay the rest of your health care expenses, even if you have a coinsurance.
So if your deductible is set at $2,000, and you have a coinsurance split of 80/20 (meaning you pay 20% of healthcare expenses and services), once you meet your out-of-pocket maximum of, let’s say, $5,000, you will no longer have to pay a coinsurance on any services. The insurance company will then pay the rest of your expenses at 100%.
The last thing we spoke of earlier was your deductible’s annual renewal.,. This means if your plan renews every January(and we take our $2,000 example), then your deductible resets back to $2,000.
This renewal date is extremely important to remember because it has a hard line. If you incur medical expenses during this time period, pay attention to when they are billed exactly, because it can be the difference between meeting next year’s deductible or having an extra bill.
Meeting Your Deductible
Now that you’re aware of the working parts, here’s an example of how you can meet your deductible with real-world expenses.
When you have to get blood work done that is not routine, or any procedure, this will all go towards your deductible. That means $160 bloodwork bill here, a $300 knee injection there. After all of these bills add up, the insurance company will pay for covered items afterward.
Just remember that if you have a coinsurance, you will still have to pay your 20% or 30% of the bill until you meet your out-of-pocket max. For final notes, we stress that you always, make sure to stay in-network and that the service is covered under your insurance, or you will be paying a bill in full that doesn’t even go towards your deductible. Contact your insurance company to make sure you do not need authorization for services, including MRI’s, X-Rays, and special visits.