There are associated costs when enrolling in a health insurance plan. These costs include premiums, coinsurance, and deductibles. The deductible is what we will concentrate on in this article. Your deductible is the amount you pay out-of-pocket before your health insurance starts to pay your covered medical services for the remainder of the year. By “remainder of the year”, we mean that your deductible renews annually. Therefore, it’s important to understand how to meet the deductible before it renews and what happens after you’ve met it.
What Counts Towards Your Deductible
Not knowing which expenses count toward your deductible could lead you to throwing money away. There are 3 basic things to remember if you want to know what payments count towards it. Any out-of-pocket payment that is:
- Medically necessary
- For a service covered by your plan
- Within your network
To simplify further, the following are some of the medical services you pay that would count towards your deductible:
- Hospital bills
- Surgery costs
- Lab tests
- MRIs and CAT scans
- Doctor visits not covered by copays
- Medical devices such as pacemakers
To give you a real-world example, if you have to have a procedure, you must first pay your deductible before the insurance company will cover the remaining costs. Say the surgery costs $25,000 and your deductible is $2,000. You will pay $2,000 and then the insurance company will pay the remaining $23,000.
What Doesn’t Count Towards Your Deductible
It’s just as important to know which expenses don’t go towards your deductible. This way if you’re keeping track (which you should be) you won’t think you’ve paid more towards your deductible than you actually have.
A copay is the portion of your medical expense that you are responsible for usually at the time of service. Typically copays are a modest, set amount. For example, you may have a $25 copay every time you visit your primary care physician (PCP). Or you may have to pay $15 every time you fill a prescription. The amount for each service varies depending on your insurance company and plan. Unfortunately these payments don’t count towards your deductible. They do however count towards your out-of-pocket maximum, which is the max amount of money you have to spend on your healthcare in a single benefit year under your plan.
Your coinsurance is another cost-sharing part of your health plan. This is usually shown as a percentage and shows exactly the percent you have to pay and the percent your insurance has to pay after you have met your deductible for the year. For example if you have a 20% coinsurance for a covered service, your insurance company will pay the other 80%. Say you’ve already met your deductible and you need a procedure that costs $1200,with your 20% you pay $240 and your health insurance will pay the remaining $960. Just like with copays, your coinsurance won’t count towards the deductible, but it does count towards your out-of-pocket maximum.
Your premium, as you know, is the amount you pay monthly to keep your health insurance policy active. While your premium and deductible do have a significant relationship, since the lower your premium the higher your deductible and vice versa, it still doesn’t count towards your deductible. Your premium will also not count towards your out of pocket maximum either.
Out-of-network care means you went to a provider that is not contracted with your health insurance plan. None of your costs with this provider will go towards your deductible or your out of pocket maximum. The only exception to this rule is if you have a health plan that does have out-of-network coverage such as a Preferred Provider Organization (PPO). A PPO has 2 out of pocket maximums, one that works like every other plans maximum and one specifically for out-of-network services.
Services not covered by your plan
If you get care that your plan does not cover it won’t count towards deductibles or out of pocket maximums either. This can include things like chiropractors, acupuncture, dental, and vision services.
Family Plan Deductible
Deductibles work differently for individual plans than they do for family plans. A family deductible is the maximum amount that a family must pay out-of-pocket before they start paying coinsurance or copays, rather than the full cost of services. Most family health insurance policies have 2 deductibles. The first being each individual member has their own individual deductible and the second is the overall family deductible. Each time a family member pays towards their own deductible the amount is also credited to the family deductible. If one member meets their individual deductible before the others, then full coverage begins for that person alone, but not for the other family members.
Once the family deductible is met then everyone will receive post-deductible coverage even if not all members met their individual deductible. Family plan deductibles are typically double the amount of an individual plan’s deductible. Although deductibles can vary, it’s uncommon for a family to pay more than the cost of 2 individual deductibles in a single year. This obviously doesn’t apply if each family member has separate policies, as the policies will not coordinate together.
High Deductible Health Plans (HDHP)
Whether you have a family plan or an individual plan you have an option with your deductible. A HDHP is not just a plan that appears to have a high deductible, it is a distinct type of health insurance – not just a generic term. A high-deductible health plan is a health insurance policy with a deductible of at least $1,400 for individual coverage or $2,800 for family coverage. These plans also allow you to make contributions to a tax-advantaged Health Savings Account that can help you save money towards your health care. A policy with a high health insurance deductible will save you money on premiums, but you may be responsible for out-of-pocket expenses of up to $8,700 for individual coverage and $17,400 for family coverage.
In recent years, HDHPs have become increasingly popular. This is because they come with lower premiums. However, even though your monthly premium is lower your out-of-pocket medical expenses tend to be a lot more expensive than someone with a LDHP. Low deductible plans come with a higher premium, but medical expenses are lower. If you expect to have very few medical expenses then a HDHP might be right for you. This is because the low premiums combined with a deductible you rarely use may save you more money. LDHP are best for people with chronic conditions or families who expect to have multiple doctor visits per year. This reduces your upfront costs allowing you to manage your expenses easier.
Once You Meet Your Deductible
After you’ve met your annual deductible, your insurance will begin paying its portion of the cost of your covered care for the remainder of the year. After meeting it, your portion of the cost of care will either be a copayment or coinsurance. It’s important to note that any health insurance plans purchased on the Marketplace legally have to cover the cost of some preventative healthcare services even before you meet your deductible. This is for any plan regardless of type or tier. Some of these preventative benefits include:
- HIV screening
- Blood pressure screenings
- Obesity screenings and counseling
- Lung cancer screenings
- Fall prevention
- Tobacco use screenings
When does my deductible renew?
Many health insurance plans base their renewal on the calendar year. This means that on January 1st of each year any expenses you have paid towards it are zeroed out. Some health plans may follow a plan year schedule instead. This means that it will renew on the date that your health insurance policy renews in the new year rather than January 1st. Understanding your plan’s deductible schedule can help you avoid unexpected medical costs. For example, if you were planning on waiting until after the holidays to get a medical service, and your plan renews based on the calendar year, you’ll want to rethink that plan. On the other hand, if it renews on your plan renewal date, you may have some wiggle room.
What does “no charge after deductible” mean?
This phrase means that once you meet your deductible the insurance company will cover the full cost of covered medical expenses, up to the plan’s limits. However, most health insurance plans usually only pay 100% of medical costs once you’ve reached your out-of-pocket maximum.
Is my deductible the same as my out-of-pocket maximum?
No, they work similarly in that they serve as a limit to how much you have to pay for your covered medical expenses, but the limits are two different things. Your out of pocket maximum is the most you will pay in one year. Once you’ve met this limit your insurance will cover 100% of all additional covered medical costs for the year in full. Your deductible is how much you pay before your plan begins their cost-sharing feature with you, such as your coinsurance.
Anything that counts towards your deductible also counts towards your out-of-pocket maximum as well. As noted above, there are some costs such as your copays and coinsurance that don’t count towards it, but will count towards your out-of-pocket maximum. Think of your deductible as a milestone, once you reach it you pay significantly less towards your healthcare, reaching your out-of-pocket maximum is the end game once you reach that you pay nothing towards your covered healthcare costs.
Working With EZ
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