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What Is a Health Deductible?

Health insurance is one of the most important types of insurance for the average person to carry. No matter who you are, there is a good chance you will incur an injury or fall ill at one time or another that will require medical care. A health insurance deductible is a fixed cost you must pay toward health insurance before the insurance provider will pay for benefits.

  1. Deductible Basics

    • Deductibles are a feature of many types of insurance plans, including health insurance, auto insurance and homeowner's insurance. For many types of insurance, deductibles apply on a per-case basis: you must pay the deductible each time you make an insurance claim and receive compensation. For health insurance, deductibles are often annual limits that policyholders contribute toward throughout the year. Once you pay your health deductible for the year, the insurance company will begin to cover costs.

    Deductibles and Premiums

    • The premium of an insurance plan is the cost of the plan that you pay each month, quarter, six months or year. The premiums of health insurance plans tend to be higher if you have low deductibles and lower if you have high deductibles. Choosing a higher deductibles can save on the cost of premiums, but if you have a serious illness or injury, high deductibles can be costly.

    HSAs

    • Health savings accounts (HSAs) are special savings plans that allow individuals with high deductible health insurance plans (HDHPs) save money toward health care expenses. According to the IRS, the money you save in an HSA is tax deductible and you can spend it on medical care without incurring taxes. Your health insurance plan must have a deductible of at least $1,200 (single coverage) or $2,400 (family coverage) to be considered a HDHP.

    Considerations

    • Your insurance company may cover 100 percent of the cost of care after your deductible is met for the year, but in some cases you may have to pay "coinsurance." Coinsurance is a shared cost beyond the deductible. For example, if your plan has 10 percent coinsurance on surgery, you have to pay 10 percent of the cost of surgery beyond any deductible you pay. You may also have to fixed costs called "co-payments" on certain types of health services (co-payments often apply to prescription drugs.).

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