Deductibles
What is a deductible, and how does it work?
Adeductibleis the amount you pay each year for most eligible medical services or medications before your health plan begins to share in the cost of covered services. For example, if you have a $2,000 yearly deductible, you'll need to pay the first $2,000 of your total eligible medical costs before your plan helps to pay.
A deductible is separate from the monthly premium you pay. After a deductible is paid, you continue to pay your monthly premium, but the medical costs are covered (aside from any copay or coinsurance charges).
What costs count toward a deductible?
Learn more about which costs go toward a deductible and those that do not.
| Costs that typically count toward deductible2 | Costs that don't count |
|---|---|
| Bills for hospitalization | Copays (typically) |
| Surgery | Premiums |
| Lab tests | Any costs not covered by your plan |
| MRIs and CAT scans | |
| Anesthesia | |
| Doctor and therapist visits not covered by a copay | |
| Medical devices such as pacemakers |
Deductibles for family coverage and individual coverage are different. Even if your plan includes out-of-network benefits, your deductible amount will typically be much lower if you use in-network doctors and hospitals.
How do I decide what health care deductible amount to choose?
If you're mostly healthy and don't expect to need costly medical services during the year, a plan that has ahigher deductibleandlower premiummay be a good choice for you.
On the other hand, let's say you know you have a medical condition that will need care. Or you have an active family with children who play sports. A plan with alower deductibleandhigher premiumthat pays for a greater percent of your medical costs may be better for you.
What is the difference between a deductible and a copay?
Depending on your health plan, you may have a deductible and copays.
A deductible is the amount you pay for most eligible medical services or medications before your health plan begins to share in the cost of covered services. If your plan includes copays, you pay the copay flat fee at the time of service (at the pharmacy or doctor's office, for example).
For high-deductible plans with health-savings accounts (HSAs), IRS rules require the plan deductible to be satisfied before any copay or coinsurance is applied.
Coinsurance
What is coinsurance?
Coinsuranceis a portion of the medical cost you pay after your deductible has been met. Coinsurance is a way of saying that you and your insurance carrier each pay a share of eligible costs that add up to 100 percent. The higher your coinsurance percentage, the higher your share of the cost is.
How do I calculate my coinsurance costs?
The amount you need to pay for your coinsurance will depend on the allowed amount that a provider can bill for their service.
For example, some health plans have an 80/20 coinsurance. This means your coinsurance is 20 percent and you pay 20 percent of the cost of your covered medical bills. Your health insurance plan will pay the other 80 percent.
If you meet your annual deductible in June, and need an MRI in July, it is covered by coinsurance. If the covered charges for an MRI are $2,000 and your coinsurance is 20 percent, you need to pay $400 ($2,000 x 20%). Your insurance company or health plan pays the other $1,600.
What is not included in a coinsurance?
You are also responsible for any charges that are not covered by the health plan, such as charges that exceed the plan’s Maximum Reimbursable Charge.
When do I pay a coinsurance
You pay for a coinsurance after you meet your deductible.
What is an out-of-pocket maximum?
Out-of-pocket maximum is the most you could pay for covered medical expenses in a year. This amount includes money you spend on deductibles, copays, and coinsurance. Once you reach your annual out-of-pocket maximum, your health plan will pay your covered medical and prescription costs for the rest of the year.
Here’s an example.2 You have a plan with a $3,000 annual deductible and 20% coinsurance with a $6,350 out-of-pocket maximum. You haven’t had any medical expenses all year, but then you need surgery and a few days in the hospital. That hospital bill might be $150,000.
You will pay the first $3,000 of your hospital bill as your deductible. Then, your coinsurance kicks in. The health plan pays 80% of your covered medical expenses. You'll be responsible for payment of 20% of those expenses until the remaining $3,350 of your annual $6,350 out-of-pocket maximum is met. Then, the plan covers 100% of your remaining eligible medical expenses for that calendar year.
Depending on your plan, the numbers will vary—but you get the idea. In this scenario, your $6,350 out-of-pocket maximum is much less than a $150,000 hospital bill!
What's the difference between copays and coinsurance?
Use this chart to compare copays and coinsurance to better understand the differences.
| Copays | Coinsurance |
|---|---|
| Paid each time you visit your doctor, or fill a prescription | Paid for services and medicines if you've met your deductible |
| Fixed dollar amount | Actual dollar amount varies; you pay a percentage of the total cost of covered services |
| Counts toward your deductible (in some cases) | Is paid after you meet your deductible |
| Paid at the time of service | Billed by the provider who you will pay directly. You’ll also receive an Explanation of Benefits (EOB) from your health plan explaining what charges you are responsible for. |
