In general, when you see the word deducted attached to something you're going to have to pay for, it's good thing, right? But it's not so good when we're talking health insurance.
That's because of the peculiar figure/ground reversal, down the rabbit-hole world, that is the reality of health insurance today.
A deductible in the context of your health plan benefits isn't something you won't have to pay. In fact, it's something that you must pay before the insurance company pays a dime on your behalf.
Even though it's often described as "your" deductible, the reality is that it's actually what the insurance company has deducted it from its own bill, not from yours.
So this unlike yesterday's topic, Actuarial Value, this is something you do have to pay attention to in choosing a plan.
More below the squiggle..
In its simplest terms a plan's deductible (if the plan has one, most do, but not all) operates somewhat like the deductible you may be familiar with from home or car insurance.
But many people haven't faced health insurance deductibles before and unlike car insurance deductibles, deductibles for health care operate in conjunction with the patients' other financial obligations within the policy. So I'll go into the whys and what-ifs to get everybody up to speed as they need to be in order to choose a good health insurance plan under the ACA.
If you need care beyond the free preventive stuff included in every Health Plan sold on the (State or Federal) Exchanges, you might reasonably expect your health insurance plan is going to pay for it. That's the point of having insurance, isn't it? But partly as a cost-containment device, and partly because they discovered they could get away with it, insurance companies started to move the threshold where they would begin to pay for your benefits farther away from the first bill they got for your care.
The theory was that if the patient had some front-end financial skin in the game (I know, a scary metaphor!), they would be less eager to seek care for things that didn't really need it in the first place. (That's the "cost containment" part.) The notion was that most people were spending unnecessary time hanging out in doctors' waiting rooms and were thrilled to have more tests performed on them, all on the insurance company's dime.
Refusing to spend that dime until it howls in pain is what makes health insurance profitable, indeed, very profitable.
Health insurance isn't like other consumer products where rising prices will squash demand and exert a countervailing downward pressure on prices. Iinsurance companies quickly found that they could raise the deductible threshold beyond the level of an over-use-discouraging-bump, to something much, much larger that operated as a full-size barrier to getting any care at all if it was set high enough relative to their clients' ability to pay the deductible. (That is the "they found they could get away away with it" part.)
Now, a higher deductible barrier at the front end is not always a bad thing, if it is coupled with a very generous payout at the back end and without any other cost-sharing nibbles on the way through. I happen to have had a high deductible, no co-pay or cost-sharing, 100% coverage after the deductible, policy for many years and have been quite happy with it. It's truly there just for what I could never hope to pay for: serious illness. And it has worked well, for my family. This type of "pure" HD policy is just one variant of effective health care coverage.
However insurance companies being what they are, soon began adding ever-higher deductibles to other sorts of policies as well. These policies already had other cost-containing devices: co-pays and cost sharing percentages and the deductibles just added to the confusion and cost of getting benefits that had been (theoretically, at least) paid for by premiums.
The advent of the ACA has unfortunately, but not unexpectedly since the insurance companies had such a large role in writing the rules, legitimized an all-of-the-above approach to the design of most of the plans.
So, now, many plans on the Exchange (every one I have seen, but then I haven't seen every single one) are built around a deductible (in addition to other cost-sharing features).
Here's how it works and here's why it's critical to understand it before you choose a plan.
In the simplest terms, whatever level of deductible that there is means you, the patient, will pay 100% of the bill for your care until the deductible is met.
There are usually individual and family deductibles. In some plans an individual within a family can reach his or her own deductible, but the more common model is that the whole family, in the aggregate, must meet the larger family deductible before any care, for any member, is paid for by the insurance company. This can be a good, or bad, thing depending on your family size (not so great for two-person households, a better deal for larger ones), your general health and other circumstances.
If you have separate deductibles for in- and out- of network benefits then each one applies to that category alone, and doesn't cross over from one to the other.
There may also be plans on the Exchanges with separate service-specific categories each with its own, un-combined deductible. Prescription drugs would probably be the most common one, though durable medical goods, and supportive services like PT and OT may also be organized like this.
The ACA was theoretically supposed to curb the tricksiest of these deals, but I'm sure some remain. Insurance weasels didn't suddenly morph into insurance ermines last Tuesday when the Exchanges opened.
Unless it was specifically barred by the ACA rules (like the elimination of lifetime caps), anything permissible in your state may have found its way into plans on the Exchanges. It's up to you to find out the details before you sign up. A major improvement due to the ACA, is that now you have required uniform disclosures of all the plan's details, and in most cases, more options so you can avoid plans designed to rip you off, and choose a better one for you. Up until the ACA many people had few, or no, options so they were simply at the mercy of rapacious insurance companies.
But still, when you're studying your options it is absolutely critical to understand that you pay 100% of everything until your deductible(s) are met. So you have to research each plan you're considering to find the deductible amounts. These will be contained in the Summary of Benefits (hereinafter dubbed the SOB) charts for each specific plan, not on the generalized charts attached to the various levels of plans. Call the insurance co.s and get the actual SOB document. Don't rely on what a call-center voice tells you.
And think hard when deciding about how much deductible you can handle: Will the level be something that makes you avoid needed care in order to save the money? Is that necessary for your circumstances? Might a higher level, or different plan, even at the cost of slightly higher monthly premium (if you can swing it) be better for you? Is there one family member who will likely go through the entire family deductible (assuming it's aggregated - again make sure it works that way on your policy? Keep in mind that all ACA policies have good back end benefits with no lifetime or annual caps on expenses for the really big problems. Concentrate on what you could afford to pay (in the form of a deductible) for the more routine stuff: a bad bout of bronchitis or a simple sprained ankle. This sort of thing is "minor-ish" when compared to a heart attack or cancer, but they still need professional care, if only to sort them out from other more worrisome things.
No one can advise you what deductible is best for your family situation. And until we get single payer coverage, it does require you to make a mostly-uninformed bet on your future chances of remaining healthy or needing some care over the coming year.
I personally think about the deductible in terms of what I could manage to pay if I got just sort of sick, not really, really sick. When I'm feeling a somewhat pressed financially (we're self-employed so our income fluctuates quite a bit), I'm more comfortable paying a bit more per month to get a lower deductible because I know I can swing tens of dollars spread throughout the year, but not thousands. But your circumstances, risk tolerance, and general approach to health care may be very different from mine.
Fortunately, this is only a one-year decision and you can change plans every year if you like, with the certainty, that now after the ACA, if you've been sick you won't be denied coverage or pay more as a result.
Now for some extra points to consider about the subject of deductibles:
First, some good news: The deductible is based on the contractual, or negotiated price the insurance co. has arranged with the providers (assuming this is in-network). And as penny-pinching as they are with their subscribers, they are even more fierce as negotiators with providers to reduce prices. One of the chief benefits having any insurance is that you are no longer forced to pay highly-inflated street prices for medical care. That is truly a BFD, as Joe Biden once said.
And for many, (perhaps most, but not all - so again, be sure to check carefully about this) the amount you pay for your deductible(s) counts as a significant component towards the annual out of pocket maximum cap. Ex: a $4,000 deductible chews a big hole in a $6,350 OOP cap. Once you reach the cap, you're covered at 100% for every thing until the end of the year. Again, it's very important to check the plan's Summary of Benefits to make sure the deductible is counted towards the OOP cap.
Some people have asked if they also have service/visit centered co-pays during the deductible period. Sometimes that's the case (see your SOB for details). This isn't necessarily a bad thing, since the co-pay goes directly to the provider at the time of service and was likely a factor in reducing the negotiated price with the provider that the insurance company wrangled for themselves, and for you, during the deductible period. (And co-pays are part of the OOP cap, too. Usually, that is, see your SOB.)
Since the deductible can be a sort of sticker shock item ("You mean after I've paid the freakin' premiums, I still have to pay -sometimes- thousands more if I need to see a doctor? What's the point of even having insurance?") I think I"ll double-back to the issue of premiums - and the extra help that can come with them to make them more affordable- before I go on to co-pays, and cost-sharing, and OOPs. So next time: One More Bill To Pay Every Month.
Araguato
Edited to add this in response to a question on my previous post: Deductibles operate on an annual basis (usually a calendar year). So you start January 1, each year with fresh heap of deductible to start shoveling away at. (Metaphor intended.) If you meet the deductible within the year then you're out of it. Until the next January when it all starts over. Moral of the story: try to stay extra healthy in the last quarter of the year if you haven't been sick earlier. I even moved my routine screenings to early January to make sure that if I needed any follow-up (which would fall under the deductible) it would start whittling away at my deductible with lots of time to finish the job and reap the "benefits" of needing deductible-met care care later on in the year.
