Is a Health Insurance Premium a Deductible?

When you have health insurance, premiums and deductibles are both expenses that come out of your pocket---or at least out of your paycheck---but they represent different things. One is a fee that you pay just to have insurance, and you pay it to the insurance company. The other represents a share of the cost of the specific medical treatments you receive, and you pay it to the health care provider.

Premiums

• A premium is the fee you pay to remain covered by health insurance. If you get your health care through your employer, you'll usually see your premiums withheld directly from your paychecks. If you have an individual health-care policy, you'll get a bill from your insurance company, perhaps every month or every three months. Health insurance premiums do pay some of the cost of your medical care---premiums provide revenue that the insurer uses to pay claims---but the key thing to remember is that you pay premiums regardless of whether you actually get any medical treatment. Once you receive treatment, you'll have additional charges entirely separate from the premiums. Those charges are your deductible.

Deductibles

• A deductible is the amount of money that you must pay for medical care in a year before your insurer will begin paying the bills. For example, say you have health insurance with a $1,000 annual deductible. If you have a car accident, go to the hospital and rack up $10,000 in medical bills, your insurance company will expect you to pay the first $1,000 yourself, then it will pick up the rest. If, later in the year, you have another mishap and run up $2,000 in medical bills, your insurer will pay the whole thing, because you've already paid your annual deductible. Money that you pay in premiums does not count toward your deductible.

Deductible Details

• A health insurance policy may have a separate deductible for each person covered in a family, plus an overall family deductible. For example, a family of four may have an insurance policy with a $2,000-per-person deductible and a $5,000 family deductible. Each time a member of the family gets treatment, the cost applies toward her own deductible, but once the total amount paid out of pocket for everyone in the family hits $5,000, the insurer begins paying all the costs, regardless of how much of each individual deductible has been paid.

Relationship

• There's often a direct relationship between the size of your deductible and the amount of your premiums. The lower your deductible, the sooner the insurance company has to begin paying all your bills, so the insurer is going to charge you a higher premium. The higher your deductible, the lower the chance that the insurer will have to pay anything, so it charges you a smaller premium.