The deductible, in plain terms.
A deductible is the amount an employee pays for covered care before the plan starts sharing the cost. It resets every plan year, and it is the number employees most often misread.
Four things employees get wrong about the deductible.
None of these are obscure. They are the questions that turn into calls to HR in February.
It resets each plan year
On the first day of a new plan year the count starts over at zero. An employee who met the deductible in December pays full price for covered care again in January.
Not every service is subject to it
Recommended preventive care is generally covered without cost sharing on non-grandfathered plans, and some plans cover other visits with a flat copay. The plan summary shows which rows apply.
Individual and family can differ
A family plan usually carries an individual deductible inside a family one. How the plan starts paying when one person reaches the individual amount is written into the plan, so read how yours is built.
A higher deductible lowers the premium, not the risk
Plans with higher deductibles usually cost less per paycheck. The trade is that the employee carries more of the first dollars of any claim.
What a 6,000 dollar bill costs this employee.
Illustrative plan: 1,500 dollar deductible, 20 percent coinsurance, 4,000 dollar out-of-pocket maximum. The curve shows how the deductible works as the first step.
Illustrative figures to show the method. Real plans vary.
The bill
A 6,000 dollar allowed amount for a covered hospital service.
The deductible
The employee pays the first 1,500 dollars.
The coinsurance
20 percent of the remaining 4,500 dollars is 900 dollars.
The result
The employee pays 2,400 dollars and the plan pays 3,600 dollars.
We show the deductible next to the bad month, not only the premium.
A deductible only means something when it sits beside what an employee would actually pay in a hard year. That comparison is how an HR team and an employee pick a plan that fits.
Related pages.
The Out-of-Pocket Maximum, Explained in Plain Terms
The out-of-pocket maximum is the most an employee pays in a plan year for covered, in-network care.
What is the difference between a deductible and an out-of-pocket maximum?
The deductible is what an employee pays for covered care before the plan starts sharing the cost.
Do copays count toward the deductible?
It depends on the plan.
How Deductibles Work
A plain-language guide to deductibles for health plan members.
Avoiding Group Health Insurance Plan Confusion
The full guide to helping employees understand their group health plan.
Questions that come up next.
Short answers to the questions employees ask after this one. Each links to its own page.
Is a high-deductible plan always the cheaper choice?
No. A high-deductible plan usually has a lower premium, but it can cost more in a year with significant care. The right choice depends on how much care the employee expects to use and whether they can cover the deductible if they need to.
Is coinsurance the same as a copay?
No. A copay is a fixed dollar amount for a specific service. Coinsurance is a percentage of the cost of a covered service that the employee pays after the deductible is met.
What counts toward the out-of-pocket maximum?
Generally the deductible, copays and coinsurance for covered, in-network care count. Premiums, services the plan does not cover and, in most plans, out-of-network care do not.
Ready? Send us your renewal, or talk it through with someone first. No cost, no obligation.
General information about group health plan terms, not legal or tax advice. Plan-specific questions belong with the plan documents and the carrier.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents, two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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