Let’s just call it the “D” word. Deductibles can sometimes feel like an unspeakable burden. For one thing, they’re confusing and can also make or break your annual health care budget. That’s because each deductible represents the amount you must pay out-of-pocket for covered medical expenses first, before your insurance kicks in.
Whether you just have a deductible for medical procedures or a separate one for your prescription drugs, the sticker shock you may face when taking care of you and your family’s health can be overwhelming. That’s why it’s no surprise that medical debt is the largest contributor to bankruptcy in the United States, according to a survey reported in the American Journal of Public Health.
To help you figure this all out (and pick the right plan for your family), we paired up with Jeanette Contreras, director of health policy at the National Consumers League. This is a nonprofit advocacy group in Washington, D.C., that represents consumers on marketplace issues, to answer your most pressing questions.
Q: What makes deductibles so confusing?
Contreras: For health care consumers, deductibles often seem like a hidden cost. After all, when you’re purchasing a health care plan, most of us focus on how much it will cost us monthly. Or we look at how much is being taken out of our paychecks, but we don’t pay too much attention to the deductible.
To make things even more confusing, you may have a different deductible for office visits and procedures than you do for prescription drugs. Most people who don’t have chronic diseases don’t even notice this, but if you take heart medication or diabetes medication, you know you must budget for your meds every month.
Q: What is considered a reasonable deductible?
Contreras: When searching for a health insurance plan that’s right for your family, you need to key into the deductible. A $2,000 deductible, for example, is a great plan as far as I’m concerned, since most usually come with at least a $6,000 out-of-pocket deductible.
You should avoid what I call “junk plans.” These are high-deductible plans (otherwise known as catastrophic plans) that come with an annual $10,000 out-of-pocket deductible plus whatever you’re paying for a monthly premium. This is where consumers get tricked. They think they’re only paying $40 per month in insurance, but if you’re hospitalized after an accident or need any type of outpatient surgery, you could easily be charged $5,000 or more for an hour-long procedure. Your insurance won’t cover any of it until you spend the full $10,000 deductible.
Q: Is there a difference between coinsurance and a copay, and how does that affect my deductible?
Contreras: These are fees you pay after you reach your deductible. Coinsurance is usually a percentage of covered services. For example, if your plan covers $100 for an office visit and your coinsurance is 20%, you will pay $20 and the insurance company pays for the rest. If you haven’t yet met the deductible, you pay the full $100.
A copay is a fixed amount you pay after meeting your deductible, and it is something most health maintenance organizations require when you see a doctor. You could pay $15 for a primary care visit and $25 for a specialist. This is all on top of the premium you pay per month.
Q: Deductibles are always based around the calendar year, right?
Contreras: Yes, which can be inconvenient for someone who is newly diagnosed in the fall. This means he or she has only three months to meet that deductible — and then it starts over in January. People who manage chronic diseases know to budget up front. For example, they know that during the first half of the year, they will spend more to see their specialists. This is what can make health care so unaffordable — that big out-of-pocket cost you incur in order to reach that deductible.
Q: How can I check how much is left on my deductible?
Contreras: The explanation of benefits (EOB) section on your health insurance website is a good source for tracking your deductible. The EOB will typically show you what the total charge/cost was for each medical service. It will include a breakdown of what the insurer covered and what the consumer’s responsibility is for out-of-pocket costs. On that document, you should also find a year-to-date amount that has gone toward your deductible so far.