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What is a “deductible” in health insurance?

Keep in mind...
  • A deductible is a cost or charge that a consumer must pay
  • Deductible is one of the costs of insurance
  • Consumer must pay deductible before insurance will pay benefits
  • The Affordable Care Act put a limit on deductibles per year

The costs of health insurance begin with premiums, but they include more. Depending on the policy, every service or benefit can have a consumer charge except the free prevention and wellness benefits required by Obamacare.

Deductibles are among the most important because they start the benefits. Comparison shopping is the ideal way to find the best fit among health plans. One can assess the impact of expenses such as copays and deductibles to determine the true costs of insurance.

Enter your zip above to find the health plans with the best deductibles and coverage for your budget.

Types of health insurance Costs

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When considering health insurance, many focus on the premium. While it may be the first item, it is not the only significant cost that consumers must pay. Deductibles must come before the insurance starts for most plans; the copays, coinsurance, and out of pocket costs can amount to large sums when users make frequent use of medical care.

The blow-itemized list includes the major expenses in health insurance.

  • Premiums
  • Cost-sharing
  • Copays
  • Coinsurance
  • Out-of-Pocket Expenses
  • Deductibles

Types of Insurance

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Deductibles help define the types of insurance sold in the Obamacare Marketplace. The metal tiers have some essential features including premiums, cost sharing, access to network and out-of-network resources, and deductibles.

  • Platinum plans have high premiums and low deductibles. The deductibles are easier to reach than other plans. This type of plan is ideal for those with heavy medical needs. They will get a lot of cost-sharing at a 90 percent to 10 percent ratio .
  • Gold plans have high premiums and low deductibles. They were set in range to be reached and to provide 80 percent insurance paid cost-sharing on essential benefits using network resources.
  • Silver plans have lower premiums than gold or platinum. Some are quite close to bronze. The range depends on the deductibles. The silver plans with very high deductibles have low premiums. Called HDHP, they can pair with Health Savings Accounts to help pay deductibles and out-of-pocket expenses.
  • Bronze plans offer 60 percent insurance cost and the lowest premiums of any type of policy. Bronze plans have high deductibles; they are the highest along with HDHP Silver plans

Counting Costs

Deductibles can be any expense that one must pay for medical services. Some benefits come without further charge such as an annual physical, health screenings, and some vaccines. Some plans call for copays and coinsurance before the deductible threshold. These copays, coinsurance, and fees for medical services all count as deductibles.

In traditional terms, a deductible is a charge for a medical benefit or service with no insurance contribution. For example, if a plan’s deductible is $1,200.00, then all medical expenses must be paid by the policyholder up to $1,200.00. After that, the insurance company pays on the cost-shared benefits. The subscriber pays coinsurance percentage and only a small copay on many covered benefits.

Network versus Outside Resources

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The biggest impact of deductibles can be in whether they move the insured towards the maximum limit. Once reached, the maximum requires the insurance companies to pay the entire benefit costs with no further contribution from the policyholder.

The limits in the Affordable Care Act on deductibles and out-of-pocket expenses apply to plans and their networks. They do not apply to plans and outside resources.

When customers use services from outside doctors and hospitals, they do not get credit for those dollars in the tally of deductibles and out-of-pocket expenses.

Silver Wins

Silver plans have some tools to help with high deductibles. The Obamacare Marketplace uses consumer information to reduce cost sharing payment based on household income.

The High Deductible Health Plan takes a Health Savings Account wherein consumers can use untaxed income to pay present or future bills and build savings for financial security.

HSA — The Tools for High Deductibles

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Deductibles can be a factor in policyholder happiness, and across the Obamacare Marketplace, the voices are loud and insistent about the rise in deductibles. There is a point in nearly every budget where the price of something one needs is too high.

In the healthcare field, that point can undo years of effort to get fit and stay healthy. Rising deductibles are a national issue. There are tools for handling excessive deductibles, and one of the best is the Health Savings Account.

It permits the use of untaxed income to go to pay medical bills or into savings to pay bills that arise. The beauty is that if not needed the funds roll over and become an asset for investment. That assumes good health, and that is not always the case.

Tax Advantaged Savings

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The maximum annual contribution to a Health Savings account is $3,200 for an individual. It rises to $4,200 for individuals aged 55 or older. Depositors reduce their taxable income by this amount. It could put someone in a lower bracket, but most certainly they can pay fewer taxes. They get this benefit every year in which the contribute to the Health Savings Account, and they save money that would otherwise go to taxes.

The money in the HSA can pay deductible expenses. This in effect reduces the deductible and makes it more achievable.

The High Deductible Health Plan has low premiums which are also a source if savings. The funds can gather interest payments and profits from the investment.

The government does not tax the interest and profits. Should the funds rollover, then the next year brings the total up to $8,400 in the account. With some good fortune, this HSA could turn into a significant financial asset.

Deductibles are the Key to Benefits

High deductibles put many benefits out of reach. Some families face deductible thresholds in the range of $13,000. While a week in the hospital might use more than that, it is enough to keep some people away from the medical care they sought when buying health insurance.

There are many opportunities to improve the situation. The law itself is under attack by the people who are paid to make it better. The US Congress has done little but attempts to repeal and defund the law for the past six years. This contributes to excessive costs since there is no effort to regulate the markets and keep prices heading downward.

Increased Effort Could Lower Costs of Health Insurance

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There is an enormous potential in the regulatory side of health insurance to affect deductibles and premiums. The US government has been a passive reviewer of Marketplace policies, and they could make greater progress as an active purchaser. The state governments controlled by Republicans have refused to get involved with prices, and this encourages higher deductibles.

The solution is at hand, but there must be a will to apply it. Clearly, the American people need relief from soaring deductibles and health insurance costs. There is a waiting market for low-cost managed care; the public would get the immediate benefits of greater government effort and government incentives to inspire competition.

Employer-sponsored HRA, FSA

Employers that offer flexible spending accounts and health reimbursement arrangements (HRAs) put the assets where they are needed. Consumers can make their healthcare decisions. Employers use VEBA and other arrangements to improve employee capacity to handle deductibles.

These efforts can cut employer costs by giving employees precise control rather than a large menu of services.

Deductibles and Savings

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Health insurance plans use deductibles to control costs and premiums. Low premiums take high deductibles and require assistance for those challenged by medical expenses. Health Savings are a great tool for handling deductible expenses, and they use tax-advantaged funds.

Comparison shopping is an excellent way to determine the best value in health insurance for an individual or family situation. One can focus on the parts of the insurance that matter most such as reaching the out-of-pocket expense limit and getting the maximum value in insurance-paid essential benefits.

Whether low-premium or low-deductibles are what you seek, enter your zip code below to receive free health insurance quotes from the top companies in your state.

Free Health Insurance Comparison

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