Healthcare Deductible & Definition Drama
Do you search for a discount code before confirming an online purchase? Or cut coupons out of the weekly paper? If you are shaking your head yes, you are akin to the 92% of respondents in a 2019 Valassis study who reported using coupons. Let’s be honest…It feels good to get a deal. For some, it is second nature to jump through hoops to bargain shop for everyday items. But when it comes to understanding the costs associated with healthcare, many choose to look the other way. It is overwhelming to sort through the summary plan documents. The terminology and numbers can be confusing. Instead of screaming and running in the other direction, take a few minutes to increase your knowledge on basic terminology so you can be an educated consumer. Let’s start by understanding your deductible. What is it? And why does it matter?
A deductible is the amount of money an individual is responsible for paying for eligible healthcare services before their insurance cost-sharing kicks in. In most situations, consumers must pay the full deductible for covered services before other eligible expenses will be paid according to the summary of benefits, and the deductible restarts at the beginning of every plan year. An example may help – Sally has a $2,000 deductible on her current insurance. Sally hurt her knee and needs to go to physical therapy (a covered benefit) for rehabilitation. Each appointment costs $200. To meet her deductible, Sally must pay $200 for each visit (and other medical expenses) until she hits the full $2,000 deductible. At that point, future services would be covered by insurance at the listed amount.
Deductibles are inversely related to the monthly premium you pay for your healthcare plan. A benefits program with a high deductible will likely have a lower monthly premium while plans with a low deductible will likely have a heftier monthly contribution. It is important to consider how often you use your healthcare benefits when choosing a new benefits plan. Consumers who do not use healthcare services regularly or often will likely see savings associated with choosing a plan with a lower premium and higher deductible. On the other hand, consumers who use their benefits regularly may see a savings when choosing a higher premium and lower deductible. While you cannot predict the future, you can look at past usage as an estimate of how much you are likely to need healthcare services.
It is important to review the fine print because some benefit plans have exceptions related to deductibles. A few examples of potential exceptions include prescriptions and preventative care visits (regular check-ups, screenings and immunizations). Exceptions are paid using the standard percentage or dollar amount included in the plan; these out-of-pocket costs are not included in the deductible grand total. Using our former example, Sally’s regular check-ups are covered at 80% by her insurance plan. Sally is responsible for paying the remaining 20% for this visit; in most cases, her contribution is not used toward the deductible grand total.
One thing is clear – the deductible on your health benefits will influence your annual out-of-pocket expenses. A better understanding of healthcare plan basics will enable you to get the most for your money when making healthcare decisions. Consider approaching your benefit plan with the same gusto you use when scouring for a deal at your favorite online shop or corner boutique!
Originally featured in UBA’s January 2021 HR Elements Newsletter.
