Understanding How Your Deductible Works

As you are looking through the health plans we offer, you’ll see they all include a deductible amount, which may be as low as a few hundred dollars a year or as high as several thousand dollars a year. You may not be sure what a deductible is, how it works, or how to decide which deductible is right for you. We’ll explain what you need to know about deductibles and how to choose one that best fits your personal situation.

What’s a Deductible?

A deductible is the amount you’ll pay every year for covered health care services before your plan begins paying its share of the costs. For example, if your plan has a $3,500 deductible, you’ll pay the first $3,500 of your covered health care costs each year. After the annual deductible amount has been paid, the plan will pay its share of subsequent costs.

Are All Services Subject to the Deductible?

No, the deductible doesn’t apply to everything. Some health care services, like preventive care screenings, will be covered by your plan before you have paid the annual deductible. You can learn which services are covered before you pay the deductible by looking at the plan’s Summary of Benefits.

How Are Deductibles Related to Premiums?

A premium is the amount you pay every month to have health insurance coverage. Premium payments do not count towards satisfying the deductible.

As you use health care services during the year, you’ll pay the full cost until you reach your plan’s deductible amount. After that, you pay a portion of the costs (such as a fixed copayment or a coinsurance percentage) until you reach the plan’s out-of-pocket limit, which is the most you’ll have to pay a year for covered health care services.

In most cases, there is a trade-off between the monthly premium and the annual deductible. Generally, plans with higher premiums have lower deductibles. Plans with lower premiums tend to have higher deductibles. Here are a couple of examples.

• Low-Deductible Plan: A $500 deductible and a $1,500 premium.
• High-Deductible Plan: A $10,000 deductible and a $980 premium.

How Do I Choose the Right Deductible?

It helps to think of the deductible as the amount of risk you are willing to accept. If you don’t want much risk, look for a low-deductible plan. If you’re willing to carry more of the risk of paying for services out-of-pocket, look for a plan with a larger deductible.

The amount of health care services you expect to use during the year also plays into the decision.

• If you are fairly certain you’ll use a lot of health care services, choosing a lower deductible will benefit you. Let’s say you have a chronic condition and receive ongoing treatment. You know your health care will cost at least $10,000 for the year. Looking at our two example plans above, you’ll pay $520 more in premiums per month with the low-deductible plan, but your deductible will be $9,500 a year less. You would save $3,260 a year with the low-deductible plan. 
• If you don’t typically use many health care services, selecting a higher deductible plan may benefit you. Let’s say you are healthy and other than routine preventive care, usually you don’t use many health care services during the year. In return for a lower premium, you are willing to accept the risk of a higher deductible. Comparing our two example plans, you would save $6,240 on premiums a year with the high-deductible plan.

When choosing a deductible amount, also consider any upcoming health services you expect to have. For example, if you’re going to have a costly procedure done, factor that into your decision-making.

If you are on a two-person or family plan, you’ll want to consider the health needs of the other people on the plan when choosing a deductible. To learn more about selecting a deductible on multi-person plans, check out our blog article on whether to stack your deductible.

Do Health Care Costs Matter After I Pay the Deductible?

Some people may think it doesn’t matter what health care costs, once they’ve paid the deductible, because then the health plan is paying the bills. That’s incorrect for two reasons:

• You’re still paying part of the costs. Even after the deductible has been paid, with most of our plans you continue to pay a portion of the costs for your care. For example, you may have a plan that requires you to pay 35% of specialist visits and hospital care after the deductible is paid, until you reach the out-of-pocket limit. Or you may have a plan with copayments, such as $450 for an emergency room visit. Your efforts to choose lower cost care will save you money even after paying the deductible.
• What your care costs influences future premiums. When we develop premium rates for next year, we look at how much care our members have been using. If they’ve been using a lot of costly services, it drives up premium prices. Your efforts to select lower-cost care after paying your deductible will help keep premiums lower in the future. Learn more about how the cost of premiums is decided.

Finding Affordable Care Options

To find affordable, quality health care options in Vermont, you can use our enhanced cost estimator tool available in the Member Resource Center. For tips on making more affordable care choices, visit vtaffordablecare.com