A Brief History of Health Insurance Deductibles
The concept of health insurance deductibles can be traced back to the early 20th century, when employers began offering group health insurance policies to their employees as a form of employee benefit. These early policies often had low deductibles, as they were intended to cover only catastrophic medical events, such as hospitalizations.
As the health insurance industry evolved, so did the concept of deductibles. By the 1970s, policies with higher deductibles and lower premiums had become more common, as a way for consumers to save money on their insurance premiums. These high-deductible plans were often paired with a savings account, such as a health savings account (HSA), which allowed consumers to set aside money to cover their deductible and other out-of-pocket medical expenses.
Today, deductibles are a common feature of most health insurance policies, including employer-sponsored group plans, individual plans purchased on the health insurance marketplace, short-term health insurance policies, and Medicare plans. Deductibles are typically set as a dollar amount that must be paid out-of-pocket by the policyholder before the insurance company begins covering the costs of medical care.
Types of Health Insurance Deductibles
There are several types of deductibles that may be included in a health insurance policy, including:
- Annual deductible: This is typically the amount that must be paid each year before the insurance company begins paying for covered medical expenses.
- Per-incident deductible: This is the amount that must be paid for a specific medical event or procedure, such as a surgery or hospitalization, before the insurance company begins paying for covered medical expenses. This type of deductible is often found on specific health insurance policies or for specific aspects of health insurance plans.
- Family deductible: This is the amount that must be paid by the policyholder and their family before the insurance company begins paying for covered medical expenses. The family deductible may be higher than the individual deductible, but it covers all family members on the policy.
What is a Copayment in a Health Insurance Policy?
In addition to deductibles, health insurance policies may also include copayments and coinsurance, which are out-of-pocket costs that the policyholder must pay for medical care. Copayments are fixed dollar amounts that are paid for specific medical services, such as a doctor’s office visit or prescription drugs. These copays are often negotiated with doctors and medical specialists and can vary between different plan options. Depending on the specific health insurance policy you have, copays may also be available for days in the hospital, urgent care visits, or specific procedures.
How Does Coinsurance Work in Health Insurance Plans?
Coinsurance is a percentage of the total cost of a medical service that is paid by the policyholder. For example, you might have a health insurance policy where the health insurance company starts paying 70% of your hospital bill after you hit your deductible, making it easier for you to deal with healthcare bills.
Factors That Affect Health Insurance Deductibles
Health insurance deductibles can vary widely, depending on the type of policy and the specific terms of the coverage. Deductibles may be as low as a zero dollars or as high as several thousand dollars. Higher deductibles generally result in lower premiums, but they also mean that the policyholder must pay more out-of-pocket before their insurance coverage kicks in.
If you are looking at health insurance policies on the Affordable Care Act (ObamaCare) Marketplace, even your income can have an effect on how high deductibles are.
All that being said, here is one more piece to this whole story that might actually be one of the most important ones.
What is the Out-of-Pocket Maximum in Health Insurance and How Does It Work?
The out-of-pocket maximum is a cap on the amount of money that a policyholder must pay out-of-pocket for covered medical expenses in a given year. Once the policyholder reaches the out-of-pocket maximum, the insurance company begins paying for all covered medical expenses for the remainder of the year. The out-of-pocket maximum includes deductibles, copayments, and coinsurance, but does not include premiums. It is important to note that the out-of-pocket maximum is different from the annual deductible, which is the amount that must be paid before the insurance company begins paying for covered medical expenses. The out-of-pocket maximum is typically higher than the annual deductible, and it applies to all covered medical expenses for the year. Understanding the out-of-pocket maximum is important for policyholders, as it can help them plan for and manage their healthcare expenses.
Choosing the Right Health Insurance Deductible: Tips and Considerations
In summary, health insurance deductibles are a way for consumers to save money on their premiums by accepting a higher level of financial responsibility for their medical care. Especially for healthy people, a higher deductible might be a great way to enjoy the protection of health insurance if unforeseen medical issues, like accidents or hospitalizations happen. At the same time, these you can keep your monthly payments lower.
Deductibles, along with copayments and coinsurance, are important components of a health insurance policy and can significantly impact the overall cost of medical care.
As you can tell, there are a lot of moving parts. If you don’t want to deal with every little detail of a health insurance plan yourself, the best option is working with a good health insurance broker. This way you simply have to explain your goal in regards to the protection you wish and the budget you are shooting for and your broker can help you simplify the search and find the best fitting health insurance plan options to choose from.
Give us a call at (877) 333-7234 if keeping things as simple as possible sounds like a good idea to you or send us a message via the contact page.
