A deductible is the amount a policyholder must pay out of pocket for covered medical services before their insurance plan starts to contribute. It is a key component of cost sharing, along with co-payments and co-insurance.
For example, if a health plan has a $1,500 deductible, the policyholder must pay $1,500 for medical expenses before the insurance begins covering costs. However, some services, such as preventive care (e.g., annual check-ups or vaccinations), may be covered without requiring the deductible to be met.
Once the deductible is reached, the policyholder typically pays co-insurance (a percentage of costs) or co-pays (fixed amounts per visit) until they reach the out-of-pocket maximum, after which the insurance covers 100% of eligible expenses for the rest of the policy year.
Health plans can have individual and family deductibles, where family plans require the total deductible to be met across all members before full coverage applies. High-deductible health plans (HDHPs) often have lower premiums but require higher upfront costs before insurance kicks in.
Understanding how a deductible works helps policyholders budget for medical expenses and choose the right insurance plan based on their healthcare needs and financial situation.
