Deductible Cost: HSA Eligibility

What is a deductible?

Whether an individual or family is pursuing home, auto or health insurance, there's a good chance that deductibles will come up when comparing the merits of each plan. A deductible is the amount an insurance plan will require the policyholder to pay out-of-pocket for medical expenses before the insurance company is required to begin paying for subsequent expenses. The deductible is a key facet of healthcare plans that will affect how much an individual pays in premiums, how to plan out future spending and how much co-insurance an insurance company will pay on an individual policy (Healthcare.gov).

For instance, if a policyholder has a $1,000 deductible, over the course of the plan year he/she will have to accumulate healthcare spending totaling $1,000 before the insurance company will step in and begin paying for eligible expenses. However, it's important to note that alongside deductibles, co-payments and co-insurance may also factor into a policy holder's out-of-pocket spending over the course of the year and these options must be weighed separately.

How do co-payments and co-insurance effect deductibles?

Co-payments and co-insurance are other important factors to consider when choosing what type of deductible is appropriate for a policy holder's insurance plan. Co-payments are the fixed amounts that patients pay for covered medical services, such as a doctor's office visit or to cover a certain prescription. While these are typically nominal fees, they are paid independently of the deductible and will not count toward the reduction of the deductible (Cigna).

Additionally, a co-insurance provision is another factor to weigh when choosing a healthcare plan will affect the overall deductible. Co-insurance is part of the structure of the insurance plan that requires the insurance company and the account holder to split the costs of a health plan service after meeting his/her deductible. For instance, if an individual's insurance plan offers a 70/30 split for medical expenses after the deductible is met, this would mean that an expenditure of $150 would result in the insurance company paying $105, while the account holder would pay $45.

Last but not least, the size of a plan's deductible will play a major role in how much the policyholder will pay in premiums each month. For instance, if an individual or family opts for a high-deductible health plan, out-of-pocket costs will be larger, but monthly premiums would be much less than plans with smaller deductibles. Ultimately, those shopping for health insurance will have to weigh all these factors to find the right match that suits their budgets, family size and plans for the future.