Have you ever wondered about that deductible you have on your health insurance policy? If so, you are not alone. This question is asked very often. It is confusing when you hear the word deductible and my hope is that this will help clear up some of the confusion.
Most people ask what is it and how does it pertain to me?
Great question, a deductible is a cost sharing mechanism that is part of your health insurance policy. The deductible actually helps with several things including; controlling cost and minimizing claims utilization to name just a couple.
In nutshell… A deductible is: The amount you pay before the insurance company begins paying benefits. After your expenses exceed the deductible amount, benefits usually are paid as a percentage of actual expenses, this depends on the plan.
Plans have varying coinsurance amounts and the most common one people are used to hearing is 80/20%. However, health insurance carriers have done a great job with providing different levels of coinsurance amounts ranging from 100%/0 to 50/50%. This is of course is different from state to state and insurance carrier to insurance carrier.
For simplicity I put together a brief example below of how the deductible would work for health insurance;
Ex: John Smith has a major medical plan with a deductible of $2,500.
If John was hospitalized he would have to first meet that $2,500 deductible prior to the carrier starting to pay claims. Once he has meet his deductible then the carrier will start paying portions of the allowed claims.
It’s also important to note, deductibles are either on a calendar basis or policy year. If your plan is based on calendar year, then every January 1st your deductible starts over. If the plan is policy year, then is based on the policy renewal date.
Hopefully, this helps…
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So in short, it is the amount you will pay before the insurance carrier starts paying any portion of the submitted claims.
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Mechanism (n): a method or means of doing something