Deductibles. It’s incredible how confusing one little four-syllable word can be.
It's important to understand what deductibles are and why it’s essential to choose the deductible amount that’s right for you. This knowledge can empower you to make wise financial choices about your healthcare and feel more confident the next time you buy health insurance.
WHAT IS A DEDUCTIBLE IN HEALTH INSURANCE?
A deductible is an amount you must pay to doctors and facilities before your plan begins to pay for eligible charges.
For example, if your deductible is $500, you must pay the first $500 for healthcare services before health insurance pays anything in many cases. Some services like preventive care screenings and vaccines may still be covered before meeting your deductible.
It’s also worth noting that your deductible amount resets every year.
WHAT HAPPENS ONCE I MEET MY DEDUCTIBLE?
After you meet your deductible, you and the health insurance plan share your healthcare costs.
Your portion is called “coinsurance.” It’s typically a percentage of the “allowed amount” for a healthcare service. The allowed amount is the price the health insurance plan and provider agree to.
Coinsurance varies from plan to plan. Many plans offer an 80/20 split: insurance pays 80% of the allowed amount and the patient pays 20%.
You continue to pay the coinsurance portion until you reach your out-of-pocket maximum for the year. Once you meet that amount, your insurance will pay for all your allowed amounts for the rest of the year.
HOW DEDUCTIBLES, COINSURANCE, AND MAXIMUM OUT-OF-POCKET AMOUNTS WORK TOGETHER
Here’s an example of how deductibles, coinsurance, and maximum out-of-pocket amounts work together. We created two scenarios for someone with individual health insurance who has surgery. Let’s assume they have incurred no other healthcare costs this year.
Scenario #1
Surgery cost (allowed amount): $15,000
Deductible: $2,000
Coinsurance: 80/20
Maximum out-of-pocket: $4,000
Patient responsibility | Insurance responsibility | Running total for patient | |
Step 1: Meet the $2,000 deductible | $2,000 | $0 | $2,000 |
Step 2: Pay coinsurance up to the maximum out-of-pocket | $2,000 | $11,000 | $4,000 |
Final patient total | $4,000 (max met) |
In this scenario, the patient meets their maximum out-of-pocket for the year. Health insurance will pay all “allowed amounts” for the rest of the year.
Scenario #2
Let’s look at the same surgery with different deductibles and maximum out-of-pocket amounts.
Surgery cost (allowed amount): $15,000
Deductible: $2,000
Coinsurance: 80/20
Maximum out-of-pocket: $8,000
Patient responsibility | Insurance responsibility | Running total for patient | |
Step 1: Meet the $2,000 deductible | $4,000 | $0 | $4,000 |
Step 2: Pay coinsurance | $2,200 | $8,800 | $6,200 |
Final patient total | $6,200 (max not met) |
In this scenario, the patient does not meet their maximum out-of-pocket amount.
INDIVIDUAL VS. FAMILY DEDUCTIBLES
If you purchase insurance for yourself and at least one other person, your policy may include individual and family deductibles.
INDIVIDUAL DEDUCTIBLE
Each person on the plan has their own deductible. If one person hits their deductible, coinsurance begins. The insurance company starts paying for a portion of the allowed amounts — even if they haven’t met the full family deductible. Individual deductibles are helpful if some family members need more care than others.
FAMILY DEDUCTIBLE
Everyone’s medical costs add together to one larger deductible. For example, with a $3,000 family deductible, your whole household must spend that amount before insurance starts helping with everyone’s healthcare expenses.
Most plans include an individual deductible and a family deductible. As family members incur medical expenses, the costs they pay count toward their individual and family deductibles.
Keep in mind that most health insurance plans pay for preventive care, regardless of whether you have met your deductible. That means you won’t pay for annual physicals, routine screenings such as mammograms, and vaccinations that meet designated guidelines. You may still be responsible for any copays.
CHOOSING A DEDUCTIBLE: WHAT TO KNOW
When choosing a health insurance plan, you need to decide whether a high or low deductible is better for your financial and medical needs.
HIGH-DEDUCTIBLE HEALTH INSURANCE VS LOW-DEDUCTIBLE HEALTH INSURANCE
For 2025, the Internal Revenue Service (IRS) defines a high-deductible health plan (HDHP) as any plan with a deductible of at least $1,650 for an individual or $3,300 for a family.
In general, higher deductibles = lower premiums, and lower deductibles = higher premiums. It’s all about balancing what you can afford each month with how much you might need to pay if you get sick or hurt.
High-deductible plans can save money if you don’t expect to need much medical care. But if unexpected health issues arise, you may have to pay a lot before your insurance starts paying. A Health Savings Account can help.
Low-deductible plans are often better for people with ongoing health needs or those who want more predictable costs.
SELECT HEALTH CAN HELP YOU SAVE ON YOUR HEALTHCARE COSTS
Select Health offers many resources to help members save money on their healthcare costs, from medical cost-estimating tools to virtual doctor visits. Our blog also features articles to help you manage your costs. Topics include the differences between Health Savings Accounts and Flexible Savings Accounts, how to save money using in-network providers, and many others.
If you have more questions about deductibles or you need to sign up for a health insurance plan, contact our Member Services at 800-538-5038. We are open on weekdays, from 7:00 a.m. to 8:00 p.m., and Saturday, from 9:00 a.m. to 2:00 p.m. (TTY: 711). Closed Sunday.
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