What Is a Deductible?

A deductible is the amount of money that you pay to a health insurance provider before your insurance coverage kicks in, and your provider begins to pay for your health care. Your deductible is determined when you select a health insurance plan, and it’s important to keep in mind that you may have more than one deductible to pay.

Depending on the health insurance plan you sign up for, you may have a deductible for standard medical care, such as doctor's appointments, and you may also have a deductible for prescription medications. Until you meet your deductible, your insurance provider will normally not cover some or any of your expenses. The insurance plan you select will determine what is covered and when.

How Your Deductible Works

Let's say that you have a $5,000 annual deductible, and you require a $20,000 procedure. Assuming you haven't already paid anything toward your deductible, you'll have to pay the initial $5,000 for the procedure, and your insurance will cover the remaining $15,000. 

Not every cost will count towards your deductible, for example preventive or routine checkups may require you to pay out-of-pocket.  Most other medical costs, unless specified otherwise by, will be covered by your health insurance provider after your deductible has been met until the new billing year or cycle.

Deductibles and Out-of-Pocket Costs

Since many insurance plans require that you cover co-pays as well as deductibles, you may be wondering what out-of-pocket costs go toward your deductible. Generally speaking, most payments made for medical attention, tests or services go toward your deductible. However, co-pays and insurance premiums do not.

Do You Always Have to Pay a Deductible?

In short no. It's important to note that many health care plans don't require you to meet a deductible to provide coverage or partial coverage for basic medical services. For instance, annual checkups, prescription medications and preventative care may be covered whether or not you've met your deductible. Therefore, you may be able to take advantage of a number of medical services, and get an annual checkup for a low cost or free of charge even if you haven’t met your deductible yet.

When getting price quotes for health insurance plans, look at more than just the premiums you'll be paying. Many plans with very low premiums come with high deductibles. Depending on your health or your expected health care needs, it may be better to opt for a plan that costs you more each month but doesn't require that you meet a large deductible before you can fully take advantage of your health insurance.

If you're in very good health and you opt for a high deductible plan with low premiums, it is recommended to set money aside so that you'll be able to cover your entire deductible in case you suffer from a medical emergency. This way, if emergency medical services are required, you'll have funds on hand so that your insurance benefits can kick in immediately.