Individual and Family

How Do Health Insurance Deductibles Work?

Updated on February 12, 2020


How Does a Deductible WorkMaybe you already have an individual health insurance plan, or maybe you are just starting to shop for coverage—whatever your situation, it’s important to know what the costs are with different plans.
Your health insurance deductible is one of the many costs you should pay attention to when deciding which individual health insurance plan you want. Read on to see the health insurance deductible definition, and get a better understanding of how it fits in with the rest of your plan.
How can knowing the deductible definition help you?
Knowing what each cost means in your insurance plan, could help you know what plan is right for you. And if you already have an individual or family health insurance plan, knowing the deductible definition will help you understand where costs are coming from.
If you’re looking to buy a new individual plan, read on to get a good understanding of health insurance deductibles, and other costs associated with your health insurance plan—after you’re all caught up on how things work, visit to get free quotes and see what plan is right for you.
Watch this video to get a comprehensive understanding about how health insurance deductibles work.

The simple deductible definition is that it’s the cost you have to pay out-of-pocket before your insurance kicks in. So say you have a plan with a $1,000 deductible and 20% coinsurance—this means you will need to spend $1,000 in medical costs before the health insurance company you bought your plan with starts paying for their percentage outlined in the plan’s details.
Keep in mind, that coinsurance will only apply to medical costs covered under your plan. So if your individual health insurance plan didn’t say anything about covering cosmetic surgery, for example, you should still expect to pay the full price for that even after you meet your health insurance deductible.

Why not just get a plan with the lowest deductible?

It may seem like the obvious choice to get a plan with the lowest deductible—you want to get that coinsurance coming in as soon as possible! But if affordability is what you’re worried about, whatever plan ends up being the cheapest depends on the person or family.
Some people would benefit from a low-deductible health insurance plan, and others not so much. This is because, oftentimes, if a cost is low in your plan (like the deductible) then it may be higher elsewhere, say, in the premium. So although you spend less money before insurance kicks in, you might be paying more every month.
The type of person benefiting most from a low-deductible plan, is probably someone has a lot of medical costs (e.g. office visits, prescription drugs) and would meet the deductible very quickly. After meeting the deductible early on in the year, they would then benefit from spending the rest of the year splitting covered medical costs with the insurance company.
On the other hand, if you are a healthy individual with very little medical costs, it might not make sense to pay more each month in your premium, in order to have a low deductible that you might not even meet. If you only spend a few hundred dollars in medical expenses throughout the entire year, and your deductible is $1000, you will never get to see the co-insurance. In this case, it might be better to get a high-deductible health insurance plan with an HSA, and save money by having a very low premium.

Knowing the health insurance deductible definition can help you choose a plan

Know the definitions of health insurance terms can seriously help when it comes to understanding what the cheapest plan is. While you might see a seemingly high premium price listed online—don’t be fooled into thinking that’s just an expensive health insurance plan. Make sure to look at the other costs, like the deductible, the coinsurance percentage, and the out-of-pocket maximum.
Once you know the deductible definition, and what all these other costs are, you can decide which type of plan will be the most affordable for you personally.
Each plan has its own terms and limitations, so be sure to check the official plan documents to understand how that specific plan works.  This article is only for general education

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