The cost of health insurance deductibles can be an unpleasant surprise and a budget-buster. The cost of deductibles varies depending on the types of health insurance plans your company has chosen. If you are paying for an individual plan, you may be able to choose your own deductible. Understanding exactly how deductibles work can save you some headaches when it comes time to pay your medical bills.
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A deductible is the amount you must pay before your insurance starts to pay its portion of costs for a covered health expense. The deductible could be as low as a few hundred dollars or as high as several thousand dollars.
If you have a $500 deductible and you incur a medical bill for $450, you will be required to pay the entire amount yourself if your deductible has not yet been satisfied. Once you have paid $500 worth of expenses yourself, the health plan will start covering your medical expenses. Depending on the terms of your plan, deductibles may not apply for every service. For example, you may not have to pay a deductible for medical office visits, but may be required to pay them for hospital visits.
If you are covering your family on your health plan, you may find that you have one deductible for the entire family or individual deductibles for each member. If the family members have their own deductibles, your plan may be set up so that once two members satisfy the deductibles, they are waived for the remaining members.
Health Savings Account
A health savings account (HSA) can be used to help you pay your deductibles. If your employer offers an HSA as part of its benefits package, a certain amount is deducted from your paycheck each period and put into your account. When you have medical expenses that haven't been paid by your health plan, you can pay for them with the money in your HSA. HSA contributions are tax-deductible and you may put up several thousand dollars per year into an HSA, depending if you are covering yourself or yourself and your family.
If your employer offers several health insurance plans, one of them may be a high-deductible plan. The benefit of such a plan is that the premiums are lower than other plans. This can work to your benefit if you remain healthy during the year. However, accidents and illnesses aren't avoidable; if you have a high-deductible plan, you may find yourself owing thousands of dollars should you become ill or injured. Insurance experts advise coupling this option with an HSA.
People sometimes confuse deductibles and coinsurance. Coinsurance is different from the deductible and is the percentage of the bill you must pay for every medical bill after meeting the deductible. Your plan may cover your expenses at 80 percent with a coinsurance amount of 20 percent. This means that 20 percent of the medical bill is your responsibility. If you have a $500 bill, and an 80/20 plan, you will pay 20 percent of the bill, or $100.