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Make Your Deductible Work For You

What is a deductible? How does it work, and how can you take advantage of it?

Written by: Andrew Hall.

Key Takeaways

  • A deductible is the amount of money you pay out of pocket for covered healthcare services before your insurance plan begins to pay.

  • After you satisfy (or meet) your deductible, you typically pay a copay or a coinsurance for covered services until you meet your Out of Pocket Maximum.

  • If you are on a High Deductible Plan (HDHP), consider opening a Health Savings Account (HSA) at the beginning of the year. HSAs can help you pay your deductible.

Learn Your Deductible Basics

Your deductible is the amount you pay for covered health care services before your insurance plan starts to pay. Plans with higher deductibles have lower premiums. That means you’ll be responsible for paying for more of your care, but it also means your monthly costs for coverage are lower.

Deductibles can range from a few hundred dollars to several thousand. When you’re looking at plans, pay attention to the medical services covered without paying toward your deductible. Many health insurance plans will cover routine and preventive carePreventive care is medical care that aims to prevent serious diseases and injuries. These include immunizations, physicals, screenings and more., and only require you to make a small copayment.

"Meeting" Your Deductible

Your deductible [1] is simply the amount you pay for covered health care services before your insurance plan starts to pay. If your deductible is $3,500, you pay the first $3,500 worth of covered services for yourself. After you pay your deductible, you typically pay a copayment or a coinsurance depending on how your plan is structured. Your insurance company pays the rest.

Spending Smart: Your Deductible Strategy

No matter what your deductible is — there’s a little bit of a strategy involved to get your deductible working for you. We’ve listed some below.

  • If you reach your deductible at any point in the plan year, take advantage of it! Why? Because once you hit your deductible, your out-of-pocket expenses for the remainder of your plan year essentially give you the best “deals.”
  • Don’t put off health care services if you need them. If you reach the deductible early in the year, you receive the highest health insurance coverage for the remainder of the year for services. (This may not pertain to individuals with a high deductible.)
  • If you are on a High Deductible Plan (HDHP), consider opening a Health Savings Account (HSA) at the beginning of the year. The more funds that you put in the HSA earlier in the year, the more interest will collect in the account. Your HSA can be used to pay toward your deductible.
  • Be smart about where you go for medical services. If you need to meet a hospital deductible, visit a hospital for imaging services rather than an imaging center. Keep in mind that this doesn’t mean you should go to the hospital when you could simply visit your physician.
  • Know the difference between a family deductible and an individual deductible. You may need to hit the individual deductible and the family deductible with a family health insurance plan before health insurance coverage kicks in.
  • Don’t forget about the deductible credit. Some health insurance plans include a deductible credit, giving you credit for money you’ve already paid toward your deductible if you switch health plans mid-year. It’s critical to confirm whether or not your plan offers this before signing up for coverage.

FAQs

Does everyone in our family have their own deductible? Or is it family-wide?

In many family plans, everyone covered under the policy pays toward their own individual deductible and the family deductible. That means that any time a member of your family sees a doctor and pays for services, that amount is applied to both deductibles. A family member may reach their individual deductible before the family’s is met. In that case, the insurance company typically begins paying its portion of that member’s medical bills. Once the family deductible is met, the insurance company pays its portion for all members covered under the policy.

Some family plans do not include individual deductibles. With these plans, the overall family deductible must be met before the insurance company pays any portion of covered medical bills for anyone.

Make sure to ask your insurance company which type of family deductible your plan has. If you’re shopping for new insurance, a GoHealth licensed insurance agent can show you the different family plans in your area.

Can I change my deductible after my plan starts?

If you’re looking to change your deductible, you’ll need a new plan. For this to happen before the Open Enrollment Period each fall, you’ll need to experience a Qualifying Life Event (QLE). Examples of QLEs include having or adopting a new child, moving, or losing your job-based health coverage. QLEs may qualify you for a Special Enrollment Period, a 60-day period during which you can sign up for a new health insurance plan.

Is an Out-Of-Pocket Maximum the same as a deductible?

No, and it’s an important difference to understand. Basically, your deductible is part of your out-of-pocket maximum. Here’s the definition of each to help explain:

  • Deductible: the amount you pay out of pocket before your insurance company covers its portion of your medical bills. For example: If your deductible is $1,000, your insurance company will not cover any costs until you pay the first $1,000 yourself.
  • Out-Of-Pocket Maximum (OOP): the maximum amount you can spend on your healthcare in a calendar year. Once you reach your OOP, your insurance company will cover 100% of your covered medical costs.

In other words, your deductible, among other costs including copayments and coinsurance, often feed into your Out-Of-Pocket Maximum, which is always the largest amount to reach in your plan.

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