What Happens When I Hit My Deductible for My Health Insurance?

Diagnostic tests for routine check-ups may not require a deductible.

Diagnostic tests for routine check-ups may not require a deductible.

So many pages and so much insurance speak! Health insurance is particularly confusing, because it has co-insurance, co-payments and deductibles. The deductible is the amount you pay before the insurance pays anything. Co-pay or co-payment is the amount you pay for each doctor visit and is often higher for a specialist. Co-insurance is the share you pay expressed in a percentage after you meet the deductible. Deductibles, co-insurance and co-payments make your health-insurance premium payments more affordable.

Risk

Insurance companies base the cost of insurance on risk and you have a high deductible, the insurance company may not pay anything towards the first medical expenses you incur. This lowers the risk to the company. A low risk for the company usually represents a lower rate for your coverage. Your age, health and personal habits factor into the risk for the insurance company. You complete an application, report your health history and choose a deductible amount. Employers typically contract for health insurance based on the risk for all employees with a set deductible, and the insurance company reviews the risk every year or so. It may raise the deductible to keep the cost the same from year to year.

Deductible

Your insurance deductible may be $50 or $5,000 or anywhere in between. Your policy may have a separate deductible amount for prescription drugs, in-patient hospitalization or diagnostic tests. Major-medical insurance coverage often has $5,000 as a deductible, as it’s intended to pay only if you have major expenses. The deductible runs for the calendar year. You may not have enough expenses to reach the deductible one year, but it starts over in January unless your policy has a carry-over provision. Some policies apply the last three months of one year to start the new year's deductible. If you have a health claim, you complete the information for your insurer and attach all of your medical bills. You’ll get an explanation of benefits that details what charges apply to your deductible. If your bills exceed the deductible amount, your insurance company pays its share and notifies you of payment.

Co-insurance and Co-pay

Your medical coverage may require a co-insurance payment. In addition to the deductible, you agree by contract to pay a percentage of some costs. An agreement for 20 percent co-insurance is common. After you meet the deductible, say $500, you pay $20 for every $100 charge with a 20 percent co-insurance. The insurance company pays 80 percent, or $80, for every $100 charged and approved. You may have co-payments for each visit to your primary-care doctor and each visit to a specialist. Common co-payments are $20 to $40, due at the time of the office visit.

Other Limitations

In addition to deductibles, your insurance policy controls the insurer’s risk with limitations for procedures, maximum charges and exclusions or items not covered. Policies cover only necessary procedures and customary charges for the area. Most policies exclude cosmetic procedures along with dental and vision claims -- unless you have specific coverage for these items. One limitation works to your advantage. You’ll benefit from the maximum out-of-pocket expense of your health-insurance policy if you have major expenses in a year. This limitation may have two figures -- the maximum amount you’ll have to pay for an individual and a maximum payment as a family.Once you reach the maximum, the insurance picks up your percentage of the co-insurance to pay 100 percent of covered charges.

About the Author

Linda Richard has been a legal writer and antiques appraiser for more than 25 years, and has been writing online for more than 12 years. Richard holds a bachelor's degree in English and business administration. She has operated a small business for more than 20 years. She and her husband enjoy remodeling old houses and are currently working on a 1970s home.

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