Explain Health Insurance Deductibles

Insurance policies normally have individual and family deductibles.
i Ryan McVay/Digital Vision/Getty Images

Health insurance deductibles are among a few common payments you make when receiving health care services. Even though you pay premiums as part of an individual policy or employer group plan, you also pay the provider for some of the treatment costs. You or your group administrator typically negotiates the deductible level when buying a policy.

Your Health Costs

You or your employer pay monthly premiums in exchange for the guarantee of benefit payments as outlined in your insurance contract. Along with your costs to get coverage, you may be asked to make co-payments on routine office visits, deductibles for major treatment or services and co-insurance, which is a percentage of the remaining costs of service after your deductible is met. In a normal 80/20 plan, you pay 20 percent of the balance and the insurer pays 80.

Deductible Basics

Some health insurance plans have basic treatment deductibles, while others have deductibles specific to certain types of treatments. You might have a hospital-only deductible, for example, that you pay only if you are admitted to a hospital for surgery or care. For a given treatment you might pay no deductible, but for another you might pay a deductible of $2,000.

How it Works

If you go to the emergency room and are held overnight for treatment, you may owe a deductible based on your policy. If you have a $500 deductible, for example, you pay that before your insurance benefits kick in. If you have no co-insurance, your provider pays the remainder of the costs. If you have a 20 percent co-insurance obligation, it is added to your responsibility. On a bill of $5,000, you would pay your $500 deductible and $900 on the remaining balance.

Saving Money

Deductibles represent an essential part of your health coverage. By choosing a higher deductible, you lower your monthly premium. This makes a lot of sense if you are less likely to use it. No deductible or a low deductible means your monthly premium is higher, but you pay out less at the time of surgery or treatment. This is the better route if you tend to use medical services regularly.

the nest