What Is a Health Insurance Deductible? What You Pay Before Coverage Begins

A health insurance deductible is what you must pay out of pocket during the policy year before your health insurance kicks in and covers your medical expenses. Keep in mind that your monthly premiums, copays and coinsurance do not count toward your deductible.

Learn how deductibles affect your monthly premium and which deductible you should choose.

Key Takeaways Health insurance deductibles are what individuals must pay out of pocket before their insurance starts paying for their medical expenses. Young and healthy individuals may want to choose high-deductible health plans, which often charge lower monthly premiums. Conversely, health plans with lower deductibles will carry higher monthly premiums. Your insurance company may still cover certain preventive services even if you have not yet met your annual deductible.

How Do Health Insurance Deductibles Work?

When an individual incurs a medical expense for a covered benefit and pays it, they pay toward their annual deductible. After reaching their deductible, they are generally responsible for paying only their copay or coinsurance until they reach their annual out-of-pocket maximum.

Consider this simplified example: An individual has a $1,500 deductible and incurs $2,000 in medical expenses. The individual pays the first $1,500, meeting their deductible, plus their copay or coinsurance and their insurance pays the remaining balance.

Certain preventive services are the exception to this rule. For example, your insurance company will pay for immunizations, alcohol counseling and screenings for diabetes, obesity and STDs even before you’ve met your deductible.^[1]

How Much Is a Typical Deductible?

Your ACA marketplace plan’s deductible will be affected by which metal tier plan you choose. In 2024, the weighted average deductible across all tiers is $3,057 and for a silver plan with no cost-sharing reduction, it is $5,241.^[2]

What Costs Count Toward a Deductible?

Below are examples of medical expenses that would count toward your annual health insurance deductible.^[3]

• Hospitalization bills
• Surgery
• Lab tests
• MRIs and CAT scans
• Anesthesia
• Medical devices (e.g. pacemakers)

Costs that do not count toward your deductible can include your health insurance premiums, expenses for non-covered health benefits and mostly (but not always), your copays.^[3]

Does Every Healthcare Plan Have a Deductible?

Not every healthcare plan will have a deductible. In fact, there are zero-deductible plans where there is no deductible you must meet before your coverage kicks in. However, these plans typically come with high monthly premiums.

What Kinds of Health Insurance Deductibles Are There?

There are commonly four types of deductibles: individual, true family, combined and embedded.

Individual Deductible

This type of deductible applies only to the individual covered under the insurance plan. The individual must pay the entire deductible amount before their insurance coverage begins to pay for their medical expenses.

True Family Deductible

In a family plan with a true family deductible, an individual's medical expenses can cover the deductible amount for the entire family, removing the requirement for everyone to need to meet their own deductible before their healthcare covers medical costs. In other words, the entire family shares one deductible and when each person pays an out-of-pocket cost, it counts toward the same shared deductible.^[4]

Embedded Deductible

Meanwhile, an embedded deductible is a type of individual deductible that is built into a family insurance plan. Each individual covered under the plan must meet their individual deductible before the family deductible is triggered and their insurance coverage begins to pay for their medical expenses.^[4]

So if John and Jane have a family plan with a $2,000/$4,000 (single/family) deductible and John has already paid $2,000 in services, he will only have to pay copays and coinsurance until he reaches the plan’s out-of-pocket maximum. Meanwhile, Jane who has only spent $1,000 in services will still need to pay for services until she reaches her $2,000 individual deductible.^[4]

Combined Deductible

If your plan has a combined deductible, that means your medical deductible and your pharmacy deductible are rolled into a single amount.^[5] Whether you pay for visiting the doctor or picking up a prescription, either will count towardthe same deductible.

What Are High-Deductible and Low-Deductible Health Plans?

A high-deductible health plan (HDHP) is a health insurance plan with a higher deductible than a traditional insurance plan. HDHPs often charge lower monthly premiums but then require individuals to pay a larger portion of their medical expenses before their insurance coverage begins to pay. In 2024, deductibles for a high deductible health plan can range from $1,500 to $7,500 for individual coverage, or $3,000 to $15,000 for family coverage.^[6]

Conversely, a low-deductible health plan (LDHP) is a health insurance plan with a lower deductible but higher premium payments.

Which Is Better?

The choice between an HDHP or an LDHP will depend on an individual's specific needs and financial situation. Young and healthy individuals who do not expect to require frequent medical attention might want to opt for a HDHP to save on monthly premiums.

On the other hand, individuals who require frequent medical attention or have a chronic medical condition may prefer an LDHP to reduce their out-of-pocket expenses and get coverage more quickly. For example, a sickly senior that sees specialists regularly and has expensive prescriptions may want a lower deductible so their insurance company can start paying for their medical expenses sooner.

How Do I Know What Deductible Amount To Choose?

Choosing the right healthcare deductible can be challenging, as it will impact your monthly premium. Here are some factors to consider when deciding what healthcare deductible amount to choose:

• Health needs: If you have a chronic medical condition or expect to need frequent medical attention, a lower deductible may be a better option for you, as it will reduce your out-of-pocket expenses.
• Budget: Consider your monthly budget and what you can afford in terms of monthly premiums and out-of-pocket expenses. A higher-deductible plan will have lower monthly premiums, but you will be responsible for paying more before your insurance coverage begins to pay.
• Emergency fund: Check if you have enough savings to cover a large deductible in case of an unexpected medical event.
• Prescription coverage: Consider if the plan covers your medications and if the cost of your medications will impact the out-of-pocket maximum.
• Flexibility: Consider if the plan allows you to change the deductible amount in the future if your health needs or financial situation changes.
• Subsidies: If you are eligible for subsidies that can lower your monthly premium, such as the premium tax credit, make sure to factor this into your decision.