1. Health

What Is a Health Insurance Deductible?

By

Updated June 20, 2012

Definition:

When you have health insurance, there will be an amount of money you are expected to pay for your healthcare services before your insurance will begin to share the cost of your care with you. That amount is your "deductible."

For example, your deductible may be $500, which means that (usually at the beginning of the calendar year) the first many visits, treatments and tests you need, up to that $500 mark, will be your responsibility to pay for from your pocket. After you have paid for $500 worth of care, then your health insurance will share the rest of the costs with you, based on your coinsurance.

$500 is not an unusual deductible for a traditional health insurance plan provided by an employer. But it is actually quite low for an individual health insurance deductible. Also, during the past few years, we've seen deductibles climb into the thousands. There are even high deductible or catastrophic health plans which have $5,000 or $10,000 deductibles.

Insurance companies use deductibles to put more of the cost burden on their insured customers. Not only does a deductible reduce the amount they must pay out on your behalf for your care, but they also know that if you are required to pay out-of-pocket for your care, you are less likely to seek care. The less you pay toward your deductible, the less likely they are to have any costs incurred on your behalf.

Therefore, the higher the deductible, the (relatively) less you will pay for your insurance premiums.

Be sure to include the amount of the deductible when you are figuring out which healthcare insurance plan to choose, either as an individual policy, or during open enrollment.

©2014 About.com. All rights reserved.

We comply with the HONcode standard
for trustworthy health
information: verify here.