Understanding Health Insurance Deductibles

Your health insurance deductible is the amount you have to pay out of pocket before your insurance provider covers all of your medical costs. The biggest difference between health insurance deductibles vs. copay is that you will always have to pay your copay. Deductibles do not count towards your copay. Deductibles are found on just about any type of consumer insurance.

Are you looking for free insurance quotes?

secured lock Secured with SHA-256 Encryption

Eric Stauffer is a former insurance agent and banker turned consumer advocate. His priority is to help educate individuals and families about the different types of insurance they need, and assist them in finding the best place to get it.

Full Bio →

Written by Eric Stauffer
Founder & Former Insurance Agent Eric Stauffer

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

Full Bio →

Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Mar 30, 2022

Advertiser Disclosure

It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance provider and cannot guarantee quotes from any single provider.

Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about insurance. Our goal is to be an objective, third-party resource for everything insurance related. We update our site regularly, and all content is reviewed by insurance experts.

Health Insurance DeductibleHealth insurance has grown into one of the most complicated forms of insurance which individuals and families must interact with on a regular basis. There are excessive forms to be filled out, lengthy contracts that must be signed, and coverage explanations that seem to be written in Greek. It is no wonder that so many people are confused about their bills when they get them in the mail.

One common feature of an insurance policy is the deductible. It can be found on car insurance policies, homeowner’s insurance policies, and just about any other type of consumer insurance. Health insurance is no different.

What is a Health Insurance Deductible?

Why does health insurance have a deductible? In the simplest of terms, a health insurance deductible is the amount which the policyholder must pay out of their own pocket before the insurance company will cover any medical treatments. This amount is in addition to any premium payments which are paid on a monthly or annual basis.

There are exceptions to this rule, such as some plans cover the cost of regular checkups. For example, a health insurance plan may cover the cost of an annual physical, even if the patient has not met the deductible for the year.

Here is an illustration of how a deductible works:

Jim has an insurance plan that carries a $1,000 deductible and a $200 a month premium payment. Each month Jim must write a check to the insurance company for $200. This premium payment keeps his plan current.

Jim falls while out hiking and breaks his leg. He visits a hospital in his health insurance plan’s network to get his leg fixed. The total cost of treatment comes out to $6,000.

The hospital will first send a bill to the insurance company which will pay their portion. In this case, it is $5,000. Jim will then get a bill for $1,000, which is his deductible amount. For the remainder of the year his insurance company will pay the total cost of any covered incident because he has met his deductible.

The above example is a simplified version, and does not take into account things like coinsurance. However, the overall theme of the example shows how a deductible works and how it will impact a patient’s medical bill.

Are you looking for free insurance quotes?

Your one-stop online insurance guide. Get free quotes now!

secured lock Secured with SHA-256 Encryption

How Does a Deductible Impact The Cost of an Insurance Plan?

Deductibles and premium costs have an inverse relationship, meaning the higher the deductible, the lower the premium cost (with everything else being equal). The reason for this is it puts more financial responsibility on the policyholder, and lowers the potential financial obligations of the insurance company.

A secondary reason it reduces the overall cost is because having a higher deductible causes the policyholder to play a more active role in their care. A person with a very low or no deductible has nothing to lose by having every little thing checked out by a healthcare professional. But if an individual may have to pay for care from their own pocket, they are more likely to do their own due diligence and find cheaper routes to a remedy.

When picking a health care plan, be sure you can cover deductible.

When comparing different health insurance plans, whether through work or on the open market, it can be tempting to focus on the monthly premium amount. It is important to pay close attention to both the deductible and the out-of-pocket maximum, as these could be amounts which need to be covered from personal assets.

Are you looking for free insurance quotes?

Your one-stop online insurance guide. Get free quotes now!

secured lock Secured with SHA-256 Encryption