How Do Health Insurance Deductibles Work?

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Purpose of Health Insurance Deductibles

  • Health insurance deductibles are a way to help offset the cost of health care. Health insurance deductibles require the insured (the person who is covered under a health insurance policy) to pay a certain amount toward his health coverage before the insurance company has to begin paying under the health insurance policy. The insurance company considers the amount of the health insurance deductible when determining how much the premiums for the health insurance coverage will be. The higher the deductible is, the lower the premiums are likely to be.

How Health Insurance Deductibles are Used

  • If a health insurance policy includes deductibles, then the insured must pay a certain amount of money toward his health care before the insurance company has to pay anything under the health insurance policy. For example, if an insured has a $1,000 deductible toward his hospital/surgical coverage, then he is responsible for paying the hospital for the first $1,000 of health costs incurred. After he pays the first $1,000, then the insurance company will begin paying toward health care costs after the initial $1,000 as laid out under the terms of the policy.

Difference Between Health Insurance Deductibles and Co-pays

  • Health insurance deductibles are not the same thing as co-pays. If a health insurance policy has a $50 co-pay and a $500 deductible, then the insured is responsible for paying for the first $500 of health care costs under his policy. After he has met the $500 deductible, then he is responsible for paying a $50 co-pay for each claim filed under his health insurance policy. The insurance company will pay the remainder of the charges due for each visit as long as the place providing medical care is covered under the health insurance policy.

Health Insurance Deductibles for Various Types of Coverage

  • Most health insurance policies have different deductibles for different types of health insurance coverage. For example, a person might have to meet a $1,000 deductible before his insurance company will pay for a hospital visit. However, he might only need to meet a $250 deductible before an insurance company will pay toward prescription medication.

Raising Deductibles to Lower Costs

  • Health insurance policies with larger deductibles generally have lower premiums. This is because the insurance company is less likely to have to pay out as much money under a health insurance policy because the insured is responsible for shouldering a larger amount of his health care costs. If you want to lower the amount of money you pay for health insurance coverage, consider asking for higher health insurance deductibles.

  • Photo Credit Faith Allen
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