Health Insurance Deductible 101

When signing up for a healthcare plan, it is important to ensure that you understand every aspect of the plan and what it means. One important part of understanding health insurance is understanding your deductible and how it will affect how much you spend on your healthcare. Here’s everything you need to know when it comes to your health insurance deductible and how it works.

What is a deductible? 

A deductible is the amount of money you are required to pay before your coverage begins to take effect. However, there are certain expenses that do not apply towards your deductible and your health insurance policy should provide you with coverage for these expenses. Health insurance deductibles can range from hundreds to thousands of dollars depending on your specific policy and some policies may not have a deductible at all. 

It is also important to note that The Affordable Care Act limits the deductible amount for health insurance policies. In 2021 the limit was $7,200 for an individual policy and $14,400 for a family policy. Typically, lower annual deductibles come along with higher insurance premiums.  

How does a deductible work? 

Now that you know what your deductible is, it is important to understand how it works! Deductibles in other forms of insurance often work on a per-incident level. However, health insurance deductibles are often set up on an annual basis and restart yearly. Once you’ve spent your out-of-pocket maximum, your plan covers 100% of costs for the rest of that year. Each year, the health plan sets a new deductible and out-of-pocket maximum. Typically, this amount is the same as the year prior, however, sometimes it does change.