What's a deductible?

A deductible is the amount of money you pay out of pocket for certain covered health care services before your health plan starts to pay. Understanding how deductibles work may help you choose the plan that best fits your needs and budget.

You can think of your deductible as adding up throughout the year. As you start the plan year, you pay the full amount for your covered health care costs — until you meet you annual deductible. Each time you pay costs that count toward your deductible, it adds to the total amount you have to pay that year. When you reach the total deductible amount, your health plan will start to pay a portion of certain health care services for the rest of the plan year.   

Keep in mind, your plan’s deductible starts over at the beginning of each plan year. And like most health care costs, your deductible may change each year.

How much will I have to pay after reaching my deductible?

Once you reach your deductible, you may still have to pay a few separate expenses for your health care. These are commonly called “out-of-pocket costs,” and they don’t count toward your deductible. They include things like:

  • Premium: The amount you pay each month for your plan.
  • Copay or coinsurance: Specific cost-shares when you get care, like a $10 copay or 20% coinsurance.
  • Out-of-pocket maximum: The most you’ll pay for allowed health care costs in a plan year. If you reach this amount, your plan pays 100% of your care.

Types of deductibles

High deductible health plan vs. low deductible health plan

High deductible health plans

A high deductible health plan (HDHP) is a type of plan that has a higher deductible than many other plans. With an HDHP, the tradeoff is you spend less on your monthly premium, but you pay more for health care services before your plan starts helping out.

Advantages of an HDHP

An HDHP may be a good fit if you’re pretty healthy and rarely have to see your doctor. On the flip side, it can also be a good fit if you’re anticipating high-cost care early in your plan year. In some cases, high-cost care can help you reach that deductible quickly, making your plan cover costs moving forward. Advantages of a high deductible health plan include:

  • Lower premiums compared to other plans
  • Option to pair with a health savings account (HSA). Employees can contribute pretax money into a special account designed for qualified medical expenses. If the funds aren’t spent, they roll over year to year.

Disadvantages of an HDHP

High deductibles can come at a cost. If you end up using more care than you or your family planned, you may end up paying more than you budgeted for. Disadvantages of an HDHP can include:        

  • Expensive out-of-pocket costs when you get care
  • Deductibles can be very high

Low-deductible health plans

Low-deductible health plans have a higher upfront monthly premium and a lower deductible, in which health insurance payments start earlier. They may be a good fit for individuals or families who see the doctor often or anticipate needing lots of care during their plan year due to a pregnancy, an upcoming procedure or surgery or a chronic condition. With a lower deductible amount to reach, your plan will likely kick in sooner compared to a HDHP.

Which type of deductible is right for me?

There’s a lot to consider when choosing a health plan — and a plan’s deductible can be a determining factor for many people. Keep in mind, there’s no “right” plan. Everyone’s situation, budget and care needs are different. Think about things like how often you see your doctor, if you can cover the out-of-pocket maximum, or if you anticipate high-cost care in your plan year.

High deductible health plans may be a good fit for people who:

  • Are young and generally healthy
  • Are not planning on becoming pregnant
  • Rarely visit the doctor or buy prescription drugs
  • Don't have dependents
  • Can cover out-of-pocket costs in an unexpected medical situation

Low deductible health plans may be a good fit for people who:

  • Are 65 or over
  • Are planning on becoming pregnant and seeing their doctor regularly in the coming year
  • Anticipate needing more prescriptions or care due to a pre-existing or chronic condition
  • Have multiple dependents on their plan
  • Anticipate upcoming expenses (history of illness or an upcoming procedure or surgery)

How do deductibles work?

Frequently asked questions about deductibles