How does my deductible work?

Question: I’m a bit confused about the deductible. How does that work in relation to smaller expenses?

Answer: The deductible represents your costs before your health insurance coverage kicks in. Many people lose sight of the main purpose of health insurance, which is to protect you from catastrophic financial loss (like the $25,000 appendectomy or the $150,000 heart bypass – real numbers) that could crush you. As with any form of insurance, you’re transferring risk. The more risk you transfer (which takes the form of lower deductibles and other benefits) the more you pay. The more risk you take for yourself (higher deductibles or whatnot), the lower your premium.

So with any covered expense, you pay the deductible amount every year unless otherwise stated. Some plans include what they call “first dollar benefits” – these are benefits that are paid for you before the deductible. A doctor copay, drug card, preventive care benefits, etc. are first dollar benefits. These first dollar benefits don’t apply to your deductible. But when you get a smaller bill, say $500, for a covered expense (let’s say for an MRI), what you pay counts towards your annual deductible.

Obviously, if you have a high deductible plan, you will pay more should a major event occur. But because you’re bearing more risk, you’ll realize significant savings on your monthly premium. Contact us to learn more or to get a no-obligation quote on health insurance for your family or business.