What is a deductible?

A deductible is the determined amount of money that a beneficiary must spend each year to activate their plan benefits. Health insurers, including Medicare and Medicaid, offer different rates for deductibles.  

After individuals pay their deductible, there are usually still some uncovered medical costs. Individuals’ copays often account for some of these uncovered costs.  

Typically, lower deductible plans correlate with higher premiums.  

What’s the difference between deductibles, premiums, coinsurance and copays? 

In addition to deductibles, there are other healthcare expenses, such as premiums, coinsurance and copays.   

  • A premium is an upfront payment that members pay to keep their policy active. 
  • Coinsurance is a set percentage of costs that members pay after reaching their deductible. 
  • Copays are a determined amount of money members pay for healthcare services. 

Why are health insurance deductibles important to healthcare?

Health insurance deductibles are important because they offer protection against any significant or unforeseen medical costs. For example, if an individual has a serious medical event resulting in catastrophic expenses, they would only have to pay a small portion of the cost with a deductible plan. 

Insurance companies involve policyholders in sharing the cost of claims, so the policyholders have an incentive to prevent risks.