As a health insurance agent I get asked that question almost daily usually by someone who is often just a little embarrassed.
Insurance is a pretty technical thing. Most of my clients have had group health insurance through an employer or their spouse’s or parent’s employer all their lives. They had no reason to learn how their health insurance policies worked because they had no choice as to which medical plan they had.
A deductible is paid over the course of the year as is any co-insurance, and any out-of-pocket maximum (stop loss). Co-pays are paid on a per visit basis in the doctor’s office and sometimes on a per-day basis in the hospital. Co-pays for prescriptions are usually paid for every 30-day refill of the drug.
Definition of a health insurance deductible
A deductible is the amount of money you have to pay for your own medical bills each year before the insurance company starts paying.
Deductibles are usually reset at the beginning of the calendar year in January.
Here is an example: If you have a $1,000 deductible and each doctor’s visit costs you $100 you will pay for the first 10 doctor’s visits each year before the insurance company will start to pay their share.
If you have 5 doctors visits ($500 of expenses) and then have a hospital stay, the first $500 of the hospital stay will come out of your pocket. The rest should be paid in part or in full by your insurance company. To muddy the water, some plans will waive the deductible for certain services. Several of the health insurance plans I offer from Anthem Blue Cross, Connecticare and Aetna will have co-pays in the doctor’s office, but no deductible. So you might only pay a $25 co-pay for each doctor’s visit. The $25 does not go towards your deductible as a general rule. Co-pays are a set amount that is paid each time a service is rendered. Co-pays usually don’t apply to your deductible and are usually not limited by your out-of-pocket maximum. So if you had 10 doctors visits with $25 co-pays, you would pay $250, but still owe the full $1,000 if you had a hospital stay. Getting back to the deductible. Most health insurance plans will have you pay a percentage of your medical bills after you have met your deductible. This percentage is usually 20%, but I have seen medical plans that ask you for 50%. This is called coinsurance. Sometimes there is no coinsurance. This means that the company will pay you 100% for covered services after you have met your deductible. The last thing to consider is out-of-pocket-maximum. Most plans will limit the coinsurance you have to pay. When, for example, your 20% equals your out-of-pocket maximum your insurance company will stop asking you for coinsurance and will pay 100% of your medical bills. Sometimes the deductible is part of your out-of-pocket maximum. You should check to see how each company does the math. Example: $1,0000 deductible $2,0000 out-of-pocket maximum The first 10 doctors visits this year (assuming that they cost exactly $100 each) will be paid completely out of your pocket unless you have other expenses. The next ten will cost you $20 each. If your deductible is part of out-of-pocket maximum: In this scenario, you will have met your deductible and paid $200 in coinsurance and therefore paid the first $1200 of your out-of-pocket maximum. If your deductible is not part of out-of-pocket maximum: In this scenario, you will have met your deductible and paid $200 in coinsurance and therefore paid the first $200 of your out-of-pocket maximum.