General Question

cinnamonk's avatar

What is a health insurance deductible?

Asked by cinnamonk (5397points) December 3rd, 2016

I am shopping around for health insurance for the first time in my life, and I am having a hard time understanding what a deductible is. For example, I am looking at a plan that includes a $7150 yearly deductible with a $140 monthly premium. The EOB says “You must pay all the costs up to the deductible amount before this plan begins to pay for covered services you use.”

Help me understand what this means. Does that really mean that I have to pay $7150 towards my health insurance before it will begin to cover costs such as hospitalizations, prescriptions, outpatient visits, etc? I make less than 10 grand a year. Does this plan make sense for me?

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31 Answers

ragingloli's avatar

it means that for example, if a procedure costs 10000, you have to pay 7150 out of pocket, and insurance only pays the remaining 2850.
a ludicrous concept to anyone outside of the colonies.

cinnamonk's avatar

Does that also mean that I would have to pay out of pocket for any procedure that costs less than $7150?

gorillapaws's avatar

If you get cancer and need $300,000 of treatment, you would only need to pay $7,150 out of pocket (plus copayments). That’s still a lot of money, but it’s manageable.

cinnamonk's avatar

I’m 26 and pretty healthy physically, so I’m not worried about getting cancer any time soon.

I’m more worried about paying for depression/anxiety medication, CBT, and potential hospital stays related to my depression.

Love_my_doggie's avatar

High v. low (or no) deductible is a gamble. Higher deductibles mean lower premiums. If someone’s on the youngish side and in excellent health, that person can “bet” on no trauma or grave illness and, thus, no medical costs from the out-of-pocket deductible. That same person would forgo routine or preventative care, to avoid paying for either.

Does this illustrate how completely dysfunctional the U.S. healthcare “system” really is?

JLeslie's avatar

Your premiums you pay monthly do not count towards the deductible. You will be paying in full to doctors and hospitals until you meet the deductible. However, the price you pay to doctors will be your plan price. Some insurance includes prescription drugs in their plan, and so that counts to your deductible also.

$140 is cheap. If you don’t get sick much it sounds like a good deal. Basically, you will be buying catastrophic coverage.

Let’s say you buy a policy with a $1,000 deductible, but you pay $500 a month. If you need $3,000 worth of health care in the year you’re still ahead with the $140 a month plan.

You have to do the math and weigh the risks.

Edit: Since you know the drugs you use, ask the plan people you are talking to how much they cost on the plan.

cinnamonk's avatar

@JLeslie in fact the plan is called “Dean Catastrophic Safety Net.”

JLeslie's avatar

It’s possible it does not meet Obamacare standards and technically you are supposed to pay the penalty too, but I’d say 95% of people who have insurance have no idea if it meets the requirements and are reporting it incorrectly unknowingly.

Love_my_doggie's avatar

Have you researched or considered a plan that’s associated with a Health Savings Account? https://en.wikipedia.org/wiki/Health_savings_account Because you’re likely to choose high-deductible coverage, an HSA could ease some of your out-of-pocket costs.

When you’re doing the math, please be sure to consider any co-pays. Co-pays are figured per treatment, and they’re separate and apart from a deductible. If you’re charged $50 for an appointment with a physician, you’ll pay that amount even after you’ve satisfied the deductible. (Of course, while you’re meeting the deductible, you’ll pay 100% of the cost; the co-pay gets absorbed in that.)

Mariah's avatar

Everyone else has already covered the original question, just my two cents now: That’s an absurd deductible. My plan is considered “high deductible” and it’s only $2900, and my company covers part of that. You’d have to get really sick to hit that and have it be worth it.

Earthbound_Misfit's avatar

Could you privately share the company you’re with @Mariah, so @AA could check their plans out.

Questions like this make me so grateful for our health system.

Hypocrisy_Central's avatar

Don’t have one, YOU ROCK OBAMA CARE!

Love_my_doggie's avatar

^^^ I’m simply glad to have health insurance at all. Prior to ACA, a prior-conditions questionnaire would have prevented me from getting coverage.

Yes, I’m very fit and healthy and, no, there aren’t any serious illnesses in my past. But, I’m no longer age 25; things happen as the years pile-up, and there are reasons (e.g. four miscarriages; a minor autoimmune condition) why any insurance company would reject me under the pre-ACA rules.

Call_Me_Jay's avatar

I’m self-employed. Without Obamacare, insurance was simply not an option. Basically I was alone instead of in an insurance pool.

The system is still stupid, though. American “health care” spending per person is TWICE what First World countries pay.

We pay huge, unnecessary insurance and administrative costs. We should simply have Medicare for everybody. Medicare is the program that works.

Of course the Republicans are eager to destroy it and maintain the inefficient but profitable status quo.

imrainmaker's avatar

It’s a gamble you’ll have to play at your own risk..!!

gorillapaws's avatar

@AnonymousAccount8 I had a friend who was playing college basketball on a scholarship and in phenomenal shape who came down with a very rare tumor that was very complicated and expensive to remove. We never know the cards we’re dealt sometimes, and there is a huge value in being protected from things that are a low chance but life-ruining if not planned for. Most people will never have a house fire, but it makes sense to install smoke detectors in the slim chance you do have one.

jca's avatar

As someone who lived in a building that was burned by a fire, I learned the hard way to always have renters’ insurance.

ARE_you_kidding_me's avatar

As others have said a deductible is an out of pocket expense. Many plans have this. Mine for example is a $2500 deductable and then 80/20 with a max out of pocket of $17k This means that I pay full price for everything until I have paid $2500 and then I pay 20% of the cost until I reach $17,000 out of pocket and then the rest is paid. Sounds like a shitty deal but it only costs me ~$20 a month (yes you read that right). Since this is a high deductible plan I qualify for a health savings account. I simply put the difference of what I would be paying for a better plan in that account which amounts to several thousand dollars a year. It’s like banking your healthcare premiums into your brokerage account where they grow tax free and you can withdraw tax free. You can either invest the money in stocks or mutual funds or let it grow at a set interest rate. Past couple of years my medical expenses have not even covered the gains. I’m effectively getting free healthcare this way. That account is growing rapidly and is well beyond the 17k max so when I really need it it’ll be there. If you are young, healthy and shopping for affordable healthcare see if you can’t find one with an HSA. There is no better insurance than having a pile of cash.

ARE_you_kidding_me's avatar

What was so hard to understand ?

cinnamonk's avatar

Man I don’t even know what a deductible is

ARE_you_kidding_me's avatar

Well, start by reading the above responses. An insurance policy with a deductible does not have any coverage until you have spent the deductible amount.

Tropical_Willie's avatar

Simple wording:

“spend YOUR money until you spend $7150” then the insurance kicks in!
Then there is insurance money; not before.

If you are in a hospital, you pay $140 for 12 months ($1680) and then $7150 (total $8830) before you get any insurance money.

JLeslie's avatar

Plus, once your insurance kicks in its most likely 70/30 or 80/20, so you still pay more money.

Mariah's avatar

@AnonymousAccount8 I’ll help break down @ARE_you_kidding_me‘s post because he had some great suggestions.

So yeah, as everyone has explained, the deductible is the amount you pay annually before your insurance company will start helping to cover your expenses.

In AYKM’s plan, this amount is $2500. But then, once he’s paid $2500, the insurance company still doesn’t pay 100% of his medical bills, they pay 80%, and he’s still responsible for the remaining 20%. That continues until he’s paid a total of $17k in medical bills during the year (if he ever even reaches that in a year, lots of healthy folks wouldn’t), at which point he won’t have to pay any more and the insurance company will pay the rest. Apparently this plan is very cheap and he’s only paying $20 a month for it (an incredibly good deal).

He also gets a health savings account (HSA) as part of the plan. This is an account similar to a retirement account in which he gets to choose some amount of money per paycheck to go into the account. So when he gets his paycheck, the chosen amount will be missing as it will have been deposited into his HSA, BUT, he doesn’t have to pay taxes on that portion of his paycheck. So it lowers the total amount of tax taken from his paycheck. The trade-off is that the money that went into his HSA, while it still belongs to him, can only be spent on health-related expenses. But while this money lives in the HSA account, it will also accumulate interest, so it will naturally grow over time. Free money, basically. The bit about stocks/mutual funds just means that, if he wanted to gamble a little bit and try to make the money grow faster by investing it in the stock market, he could do that, but he’d risk losing some of it. The alternative is to just let it grow at a fixed, slower rate. And, unlike certain retirement accounts where you can put in money tax-free at the beginning but then you have to pay taxes on it when you withdraw it when you’re old, he also won’t have to pay taxes on it upon withdrawal. A lot of times with an HSA, the restriction that you can only use it for medical expenses is lifted when you turn 65, so if he still had money in that account at that age, he could spend it on anything he wanted. Then essentially he’d just avoid paying taxes on some portion of his income over the course of his life, legally, by putting it into his HSA.

I understand though at your income level you probably don’t have much disposable income to just throw into something like an HSA, so I don’t know how much that helps.

Does that help unravel it?

cinnamonk's avatar

I’m trying my best to understand, but it’s hard.

cinnamonk's avatar

I have an unreasonably hard time processing this kind of information. But I definitely know what a deductible is now!

JLeslie's avatar

It’s confusing to almost everyone at first. You probably Winter completely understand until you use the insurance, and it doesn’t cover you how you thought, and you’ll be annoyed, but learn more about the system.

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