What is a deductible in health insurance?

A deductible in health insurance refers to the specific amount that a policyholder must pay out-of-pocket for covered health care services before their insurance begins to contribute towards those costs. Once this deductible amount is met, the insurance company will start to share in the costs of covered services, typically through co-insurance or copayments.

This concept is crucial in understanding how health insurance policies work since it determines when the insurance benefits kick in. For many health plans, the deductible is set to reset annually, meaning that the amount paid towards the deductible does not carry over into the following year. This annual reset requires insured individuals to budget for out-of-pocket expenses each year at the start of their coverage cycle before insurance contributions begin.

In contrast, regular payments made out of paycheck relate to premiums, not the deductible. The maximum amount insurance will cover refers to out-of-pocket maximums or limits, while the percentage paid for services after reaching the deductible pertains to co-insurance or co-pays. Understanding the role of a deductible is fundamental for individuals when planning their healthcare expenses and choosing the right insurance plan.