Your deductible is the amount you pay for health care out of pocket before your health insurance kicks in and starts covering the costs. Some expenses, like an annual check-up or doctor’s visit, might not be subject to the deductible, depending on your plan. The deductible might be anywhere from $0 to $7,500 if you’re an individual, or $0 to $15,000 if you’re a family. In general, plans with higher deductibles have lower premiums and vice versa.
As an example, if you have a $1,000 deductible and have a $5,000 surgery, you’ll have to pay $1,000 out of pocket, and the remaining $4,000 will be covered all or in part by your insurance company.
However, even after you've paid your deductible, covered services may still have a copay or coinsurance, depending on the details of your plan.
How a health insurance deductible works
The benefit of a health plan is that it helps pay the cost of your medical expenses, but health insurance doesn’t always pay for everything — oftentimes you’ll have to chip in, too. That’s why most health insurance plans constitute a cost-sharing plan between you and the insurer; you pay a portion of the costs and your insurer pays a portion of the cost. How those costs are determined depends on different aspects of your plan, including the deductible.
The deductible is the dollar amount that you must pay out of pocket before your health insurance begins paying for covered medical expenses.
When you purchase an individual plan on the health insurance marketplace, and sometimes even if you’re choosing a plan offered by your employer, you will need to choose a deductible amount for your plan. Deductible amounts can range from $0 to as high as $7,500 for an individual and $0 to as high as $15,000 for families. (We’ll talk about health plans with high deductibles later.)
When a family has coverage under one health plan, there is an individual deductible for each family member and family deductible that applies to everyone. For example, the family deductible might be $2,000 and each individual deductible might be $350.
As an example, you have a $500 deductible and have your first doctor’s visit of the year. The doctor’s visit costs only $300, so you have to pay it in full because you haven’t met the deductible (you still need to spend $200 more). You go to the doctor for a second visit, which also costs $300. This time, you only need to pay the provider $200, since you met the deductible. The remaining $100 will be covered by insurance according to the details of your plan. (More on that below.)
However, certain procedures or services — like preventive care or a visit to a primary care doctor, perhaps even the example we used above — might not be subject to a deductible. That means the insurer will pay the entire cost of the visit minus a small copay, which you pay out of pocket. (You can check the benefits page of your plan to find out if you have a copay and when it applies.)
Related article: our study of where Obamacare plans cost the most.
After meeting the deductible
The next time you have a medical expense, you will only be responsible for coinsurance, having already met the deductible in full. The deductible resets every year, so each year you’ll need to repeat the process and pay out of pocket again before your health insurance covers your medical expenses.
More health insurance deductible examples
Let’s say you have a health insurance plan with a $500 deductible. A major medical event results in a $5,500 bill for an expense that is covered in your plan. Your health insurance will help in paying for these costs, but only after you’ve met that deductible. This is what happens next:
You pay $500 out of pocket to the provider.
Because you met the deductible, your health insurance plan begins to cover the costs.
The remaining $5,000 is covered by insurance, but you may still be required to pay a percentage of the costs, depending on if your plan has copays or coinsurance.
Copay
A copay is a fixed amount you pay for a covered expense. Let’s say your plan requires you to pay a $250 copayment for any outpatient surgery. Using the above example, your health insurance would pay the remaining $5,000, but you would have to pay $250.
Coinsurance
If you have coinsurance, then you and the insurer will split the remaining costs by a percentage. A common coinsurance split is 20%/80%, meaning you pay 20%, and the insurer pays 80%.
For this example, you would pay $1,000 (20% of $5,000) and your insurer pays $4,000.
Out-of-pocket maximum
Another feature of a health plan is the out-of-pocket maximum, or the most you’ll have to spend for covered services in a given year. The maximum out-of-pocket limit for 2023 is $9,100 for individual plans and $18,200 for family plans. These are federal government set limits, but your plan may have a lower out-of-pocket maximum.
Learn more about the difference between deductibles and out-of-pocket maximums.
What expenses count towards the deductible?
When you’re trying to meet your deductible, certain health care costs will be excluded. Premiums and copays generally don’t count, but you should check the details of your plan.
As mentioned, usually the cost of certain preventive services and benefits (like an annual physical exam) do not count towards the deductible either, because they are covered in full by health insurance. (They’re considered an essential health benefit, so you can get them for free before you even meet the deductible.)
Prescription drugs are also typically covered even if you haven’t met the deductible. However, certain plans may require a separate deductible for prescription drugs, before insurance helps to shoulder the costs.
High-deductible health plan (HDHP)
An HDHP is a health plan with a deductible of $1,500 or more for individuals or over $3,000 for families. The trade-off for having high deductibles is lower monthly premiums, which means cheaper health insurance. Also, HDHPs let you qualify for a health savings account (HSA). However, because of the high deductible, this type of plan could end up more costly in the long run.
Read more about if a high-deductible health plan is right for you.
Choosing the right deductible amount
The best health insurance coverage for you depends on your budget and your health history. When buying an insurance policy, you’ll be able to choose your deductible amount. Many people only look at the insurance premiums when comparing health plans. But this monthly price only represents one of the expenses that contributes to how much you'll spend on health care in a given month. (If you have workplace coverage, the premium is probably taken out of paychecks directly — and it will cost considerably less than if you were to buy an individual health plan on your own.)
Other expenses, including your health insurance plan's deductible and the copay and coinsurance costs, directly contribute to how much you'll be spending overall on health insurance, as we’ve seen in the example above.
Generally, individually purchased plans with a lower monthly premium will have a higher deductible, copay, and coinsurance percentage, which increases the amount you'll spend out of pocket for medical expenses.
When choosing a health insurance company and plan, make sure to look closely at these costs. If you think you will utilize your health insurance plan frequently — because you're managing a chronic condition or otherwise — the plan with the lowest monthly premium may not actually be the cheapest in the long run because of the high deductible.
