Deductible Vs Out-Of-Pocket - Learn How Much You’ll Be Paying

Do you know the difference between your deductible and out-of-pocket costs? Understand how each works so you don’t get hit with any surprise hidden healthcare costs this year, and get some peace of mind.

FirstQuote Health Staff
Published on
October 10, 2018
Last Updated on
November 6, 2023
Deductible Vs Out-Of-Pocket - Learn How Much You’ll Be Paying

One of the most intimidating aspects of health insurance is not only familiarizing yourself with the jargon, but understanding how everything actually works. Without a proper understanding, you may get hit with a barrage of hidden costs that aren’t very hidden. Terms like copay, deductible, and annual limits are clearly outlined, but most people have a hard time looking past the sticker price (monthly premium). So, to make sure you know what you’re signing up for, we’re going to cover one of the more complicated matters, deductible vs out-of-pocket.

Deductible Vs Out-Of-Pocket

The deductible amount in a health insurance policy is the portion that the patient is responsible for paying before any type of insurance coverage kicks in. Many times the amount that the insured owes to a provider is presented to policyholders at a reduced rate, due to negotiated rates that insurance companies have agreed to within contracts formed with various hospitals.

An individual who seeks care at a hospital that is out-of-network may meet their limit quicker than if they sought out in-network care, due to the higher cost of care generated by out-of-network providers. A policyholder’s out-of-pocket obligation is the maximum amount that they are responsible for on an annual basis. This amount includes copays, coinsurance, and deductibles.

How Deductibles Work With The Annual Policy Limit?

The confusion for most people stems from deductibles being included in the out-of-pocket maximum. So hopefully this helps clear things up.

As mentioned before, out-of-pocket costs include a handful of different expenses, including your deductible. Your deductible, one of the many out-of-pocket expenses, is the amount of money you pay out of your own pocket before your benefits kick in. So, once your deductible is met, your health insurance will start to cover your bills, and you will only be left with copays and coinsurance.

The out-of-pocket annual limit, or maximum, refers to the absolute most you will have to pay towards your bills. Meaning, after your deductible has been met, and your copay and coinsurance total your out-of-pocket limit, you’ll no longer be required to pay any expenses.

How It Works

Health insurance companies usually categorize deductible vs out-of-pocket costs on both a per individual and a per family basis. Once these limits are met per individual, the health care plan then switches over to higher per family limits. When an insured receives care, they either pay a copay at the time of the visit or are billed after the insurance company pays its portion. The insurance company receives a bill from the provider and pays their portion of the negotiated amount.

The company then sends the policyholder a bill for the remaining amount, which is any amount of money up to the deductible. After the deductible is met, the insurance company begins covering services at a different amount (usually 50% or 80%). The amount not covered is what the insured is responsible for and any amount paid contributes to their personal coverage limit.

Costs Not Included In Deductible Vs Out-Of-Pocket Fees

Deductibles, copays, and coinsurance are all included in your out-of-pocket costs, but there is one expense that isn’t covered by either. Your monthly premium, often the basis most people make their health insurance decision on, is a fee you pay every month but is not included in your deductible or out-of-pocket expense.

How Should You Pick a Plan?

Deciding whether to pick a health insurance plan based on deductible vs out-of-pocket costs can be difficult. Traditionally, insurance plans with high limits for both are considered catastrophic coverage plans. They are mainly helpful if a catastrophic event, such as a major car crash, were to occur. However, they aren’t as helpful for minor accidents.

Other insurance plans may have lower deductibles with higher out-of-pocket costs or vice versa. This setup is made with the intention of saving money on the overall cost of healthcare. When considering which type of plan to select, individuals must consider their family size, the frequency of health-related visits, and income restrictions. Generally, a plan with a higher monthly premium will be accompanied by a lower annual maximum limit.

Check Out First Quote Health

Discovering the right plan is crucial for obtaining adequate coverage at an affordable rate. With help from a professional, this process can be simplified. FirstQuote Health can help find the coverage you need with a price you can afford. To get started, enter your zip code and compare health insurance quotes in your area within minutes. Get covered as quickly as today.

Popular Articles

Find Health Insurance Quotes in Under 5 Minutes

Simply enter your zip code to find health plans in your area

Redirecting, please wait...
There appears to be an error. Please submit a valid ZIP code.