D is for Deductible

For better or worse, health insurance has been in the news a lot lately, so we are continuing our series to help you understand different terms that may come up.

Today we are discussing Deductibles.

Your deductible is the amount you pay out of your pocket before the insurance plan begins to pay for care.

Have you ever had one of those years where you met your deductible before you could even blink? A number of years ago our family planned to go to a movie on January 1. Instead, we ended up in the ER for hours with our oldest daughter who was about 5 at the time. It turned out that she had a UTI, and we ended up meeting her deductible on day 1. Not a great way to start the year!

Every plan is different, so it’s important to know when your deductible applies. Here are some questions to ask about your plan:

How much is my deductible? In 2017 it could be as low as $0 and as high as $7150.
Are there separate deductibles for any services? Prescription drugs may have a separate deductible.
When does it apply? Are doctor’s visits covered by a copay or do you have to pay the deductible first? What about hospitalization, ER visits, or drugs?
What is my family deductible? In most situations the family deductible is 2 times the individual deductible. This means not everyone has to meet a separate deductible before the insurance plan pays for services.

It’s important to note that your whether or not your deductible applies can change depending on what types of services you need.

Some plans with give you 2-5 doctor’s visits for just a copay at the start of your contract. If you exceed the initial number of visits, the deductible will apply. So rather than paying a $30 copay, you may be paying $200-300 for the office visit. In addition, the type of doctor visit may be important. Some plans in Washington will waive the deductible for Primary Care and Specialty Care doctor visits, but the deductible will apply to Rehab/Physical Therapy visits.

Another situation where there can be variation is prescription drug coverage. Your plan may cover generic drugs with a small copay but expect you to meet your deductible before they cover brand name drugs. Plans may expect you to meet your deductible before they cover any drugs, or the deductible may only apply to non-preferred or non-formulary drugs.

Are you confused yet? Let’s come up with an example:

Joe’s APlusGeneric Insurance plan

Annual Deductible: $3000

Out-of-Pocket Max: $7150

Office Visit Copays: $25, no deductible

Hospitalization: Deductible, then 20%

Generic Drugs: $15, no deductible

Brand Drugs: Deductible, then 20%

Let’s assume Joe goes to the doctor because he doesn’t feel well. In this situation Joe’s plan has a $3000 deductible, but it doesn’t apply to office visits. He would pay only $25 for that visit. The doctor prescribes Joe a generic drug that he fills at his local pharmacy. The generic drug normally costs $30, but Joe only pays $15 because of his insurance plan.

Joe’s Costs:

Doctor Visit: $25

Generic Drug: $15

Total: $40

Poor Joe, the medicine didn’t work, so he goes back to the doctor. The doctor prescribes a stronger drug, and it’s a brand name drug that costs $70. Joe pays the full cost of the brand name prescription because his deductible applies.

Joe’s Costs:

Doctor Visit: $25

Brand Drug: $70

Total: $95

At this point, Joe has met $70 of his $3000 deductible. He does not have to pay the full $3000 all at once. Rather, any cost he incurs will slowly chip away at that deductible. He now has another $2930 to pay on his deductible.

Later that year, Joe finds out he needs to have surgery. Generally, most plans require you to meet your deductible when you have surgery. Let’s assume Joe’s surgery is $5000.

Joe’s Surgery: $5000

Deductible left: $2930

Remaining Cost of Surgery: $2070

Joe already paid $70 of his deductible on the brand name drugs earlier in the year. Now he will be responsible for the first $2930 of his surgery. At that point he will have met his deductible for the year. The deductible is calculated per calendar year, and not per illness or injury.

Since Joe has now met his deductible, he does not have to pay the remaining $2070 on his own. The insurance company will pay 80%. Joe will pay just 20%, or $414. His total responsibility for the surgery is $3344.

If Joe needs any other care during the calendar year, he will know that he has met his deductible and the insurance company will be paying a larger portion of the bill.

Tips and Tricks with Deductibles:

A higher deductible means a lower monthly cost
You potentially get more benefit by meeting the deductible early in the year.
If you haven’t met your deductible and need elective surgery at the end of December, it may be worth waiting until January. This is only from a financial perspective – please talk to your doctor about this.
If you meet your deductible early in the year, consider any other procedures or services that you have been delaying. It may be worth doing everything during the same contract year.
If the deductible is waived, the copays do not apply to your deductible – they will apply to your out of pocket maximum instead.
Some plans will have a separate deductible for certain services, such as prescription medication.