Deductible insurance works by having you pay a set amount out of pocket before your plan pays for the costs it covers. This type of health insurance policy saves you money by keeping premiums low and capping the total amount you pay in a year.
But not all health insurance deductible policies are created equal. Variations and details are so complex it’s hard to understand these policies.
To help you make sense of the options, ask the following questions. These won’t be the only factors in your decision, but you’ll make a better choice if you include them.
Your health insurance monthly premium is the amount of money it costs to maintain your insurance policy each month. The premium isn’t part of your out-of-pocket maximum.
Your insurance will list a premium amount, but if your annual income is under 400% of the federal poverty guidelines, you can receive a substantial discount.
Each time you access health care with a deductible plan, you pay a certain amount out of pocket. Often, you pay a percentage of the care or a discounted price compared to uninsured patients.
In many cases, costs will vary depending on the type of procedure. Your deductible might be the entire cost of an emergency room visit, but only half the average price for prescriptions and nothing at all for preventive care visits.
The details here can be complex, but it’s worth taking the time to understand them fully. Compare them to the specific details of other plans and your possible health care needs to make an informed decision.
Deductible health insurance plans have an annual out-of-pocket maximum, after which the details of your plan change. Usually, this happens in one of three ways:
Compare the out-of-pocket maximums to the other factors of your plan to determine how much financial help the policy will realistically provide.
Some, but not all, deductible plans have a per-incident maximum and an annual maximum.
For example, consider a policy with a per-incident maximum of $2,000 and an annual out-of-pocket maximum of $6,000. In January, an ER visit that cost $3,000 would only require a $2,000 payment from the policyholder because of the per-incident maximum. After you paid that bill, there would be a remaining $4,000 of annual maximum to work through before all remaining care for the year was free.
Under some plans, you don’t have to pay any deductible for certain medical services. These are usually limited and are defined clearly in your paperwork.
Most of the time, this is for preventive care like annual checkups or prenatal visits. This is because insurance companies understand that ongoing health maintenance saves in the long run.
Look at the fine print for these services. In many cases, parts of your visit will be free, while others will carry a cost. For example, your annual checkup might have no cost, but you’ll still pay a deductible for lab work or for the consultation with a specialist that resulted from your checkup.
Few health insurance plans cover every possible kind of medical care you might need. For example, most won’t pay for elective surgeries like cosmetic procedures or laser eye surgery. If the health care system is faith-based, they might exclude birth control or even STD screenings. In other cases, the exclusions are purely cost-based.
Avoid unpleasant and costly surprises by understanding what isn’t covered. Compare coverage between plans, and also use this to exclude anything that doesn’t cover care you’re likely to need.
Most health insurance plans have a network of providers, and if you receive care outside of that network, one of three things will happen:
Find out exactly what providers are in the network and what happens if you go outside of those providers. In some cases, you can qualify for coverage if you go through a referral process before receiving care.
Also, investigate what happens if you get sick while traveling outside of areas where your insurer operates. Most will have a policy that gives you coverage for emergency care while you’re away.
This is a two-part question. The first is relatively simple. Prescription coverage will differ from your other coverage, and it’s essential to understand precisely how.
Second, look at the specific medications your family regularly needs, such as insulin or high blood pressure drugs. Find out how those are covered under the plan so you know how much you can expect to pay for your medicine.
Start this broader-reaching question by examining the needs of your household. A healthy couple with no kids in their 40s will need different coverage than a couple with three teenage boys.
Consider the kinds of medical care you’re likely to need, the number of prescriptions you’ll get each year, what type of specialty visits you’ll have, and any other factors about your health and health care needs.
Make a checklist out of these considerations, then compare it to the plans you’re considering. This will probably eliminate a few and make others stand out as better options.
Health insurance you can’t afford to pay for is worse than no coverage at all. Once it lapses, you pay the total price for all medical care, and you’re out what you spent on premiums before it expired.
Run all of the following numbers against your budget to see what you can afford in terms of coverage:
If any of those line items don’t work out, the policy is probably a bad match for your needs.
If you have a high-deductible plan, it can be worthwhile to invest in supplemental insurance. These plans pay you a flat fee or a percentage of care costs when you need medical care. For example, a plan might pay you $50 if you get x-rays and $100 for a qualifying ER visit.
These plans are not intended to replace regular health insurance. Instead, they help ease the burden of sudden medical expenses. If your deductibles and maximum out-of-pocket stretch the limits of your savings, it’s worth taking a look at this supplemental coverage.
Do the same due diligence for these plans as for your regular coverage. Here, a lousy match is just as damaging as a bad match for your overall plan.
An HSA (health savings account) is a tax-sheltered savings account you can access for health care expenses. Its primary purpose is to give you tax-free funds to pay deductibles and copays.
If you have an HSA, compare its balance against the maximums under your plan. Ideally, you would have enough to cover the entire maximum. If not, that doesn’t mean a plan is unsuitable. It means you should shop around a little bit more before committing.
You also want to ask about embedded vs. collective deductibles if you have a family. Each individual has their own maximum out-of-pocket cost with an embedded deductible. With a collective deductible, the entire family’s expenses are totaled.
For example, imagine a family of four racks up a total of $8,000 of medical expenses: $5,000 for the mom, $1,000 for the dad, $0 for the daughter, and $2,000 for the son.
Under a collective deductible plan with a $20,000 maximum, all four would still pay for medical expenses until their total costs came to $20,001.
If they had an embedded deductible plan at a maximum of $2,000 each, the situation would be more complicated:
This is just one example that illustrates the concept and shows how complex all of this can be, but the more questions you ask, the better you’ll understand your coverage.
Stephanie Littel writes financial consumer pieces online from her New York home.