How do health insurance deductibles work?

A deductible is the amount employees must pay for covered services before insurance begins paying. Higher deductibles typically mean lower premiums.

Health insurance deductibles represent the amount you pay out of pocket for healthcare services before your health insurance kicks in to cover the costs. Think of it as a threshold you have to meet. For instance, if you have a deductible of $1,000, you would need to pay the first $1,000 of your medical bills up front before your insurance starts chipping in. It's important to note that not all healthcare services may be subject to the deductible—some preventive services might be covered even before meeting this amount. Generally, plans with higher deductibles tend to have lower monthly premiums, presenting a trade-off between upfront costs and lower monthly payments.

Imagine you have a health insurance plan with a $1,500 deductible. Throughout the year, you have a few medical expenses: a doctor visit costing $200, a prescription for $100, and lab work for $300. These expenses total $600, all of which you're responsible for paying as you haven't yet met your deductible. Later in the year, you have a more significant medical expense, like a hospital visit that costs $2,000. At this point, since you've already paid $600 and still need to meet your $1,500 deductible, you pay another $900. After this, your insurance would cover a portion of the remaining expenses as you’ve reached your deductible limit.

When choosing a health insurance plan, consider your typical healthcare needs and budget. If you generally have few medical expenses and want to keep your monthly costs low, a plan with a higher deductible might be ideal. However, if you anticipate needing regular or expensive care, a plan with a lower deductible may save you money in the long run. Always read your plan's details carefully to understand what services are included and when your deductible will apply. Additionally, setting aside savings for unexpected medical costs can be a smart strategy to avoid being caught off guard by unplanned expenses.