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

Navigating your health insurance can be overwhelming. With so many confusing terms being thrown around – deductible, copay, coinsurance, premiums – it’s hard to know what’s what. Thankfully, it’s actually pretty simple when you break it down into parts. If you’re wondering what happens when you’ve met your health insurance deductible, you’re in luck. The Nest has got you covered!

A deductible is the amount of money you pay before your insurance starts kicking in for medical expenses. Your deductible is separate from your premium, which is the amount you pay each month for your plan. Think of your premium as your plan's subscription fee, which is separate from your deductible. Once you incur medical expenses, you must pay your deductible in full before your insurance company is on the hook for any cost coverage. The cost of a deductible ranges widely across insurance plans. For some plans, it may only be a few hundred dollars. For other plans, the deductible can be thousands. Recent health insurance data shows that deductibles cost an average of $4,328 for individual plans and $8,352 for family plans.

How do deductibles work in practice? Let’s say your health insurance deductible is $1,500 and you incur a medical bill of $2,000. You will be responsible for paying the full $1,500 deductible before your insurance company covers anything. Now you want to know: How much will your insurance cover after you’ve paid your deductible? That depends on your specific plan and whether you owe coinsurance.

Coinsurance means that both you and your insurance company pay a portion of your medical expenses after you’ve met your deductible. Coinsurance tends to be divvied up in percentages. For example, your insurance company may cover 70 percent in coinsurance while you’re responsible for the remaining 30 percent.

Let’s return to your $2,000 medical bill as an example. You pay the deductible of $1,500. After you’ve paid the deductible, coinsurance kicks in. Your insurance company pays 70 percent of the remaining $500, totaling $350. You owe the remaining $150, making your total out-of-pocket cost $1,650, including your deductible and coinsurance.

Copays are fees that you pay for routine medical care, such as doctor, specialist or emergency room visits. For instance, you might have to pay a $20 copay for each visit to a doctor’s office. Usually copays do not count toward your deductible, although health plans differ on this point. Contact your insurance provider for specifics.

The good news is that if you have health insurance, you are not responsible for unlimited out-of-pocket expenses. Your plan will have an out-of-pocket maximum. This is the maximum you can spend each year on medical expenses before your insurance company is forced to pay the rest. This is to prevent insurance holders from bankruptcy or worse, which is the entire point of carrying insurance in the first place. Under the Affordable Care Act, eligible Marketplace health plans have out-of-pocket limits of $7,350 for individual plans and $14,700 for family plans.

Let’s say you have an out-of-pocket maximum of $7,350, and happen to get in a serious car accident where you incur $30,000 of medical bills. You can only be charged a maximum of $7,350. That number includes your deductible and any copays or coinsurance you’ve paid over the year. Your insurance company must cover the rest.

Note that although copays don’t usually count toward your deductible, insurance companies are required by law to count them toward your out-of-pocket maximum. So make sure to save your medical receipts!