Health Insurance Deductible

What is a Health Insurance Deductible?

Your health insurance deductible is the amount you have to pay out-of-pocket for covered services before your insurance begins to pay. It doesn’t include premiums or costs that aren’t covered by your plan. Once you meet your deductible, your plan will pay its share of your coinsurance.

TIP: Your maximum deductible is capped each year and is the same as the out-of-pocket maximum (which is also capped). Thus each year the published out-of-pocket maximum limits are equal to the deductible limits.

For 2023 Plans:

Your deductible can be no more than $9,100 for an individual plan and $18,200 for a family plan before marketplace subsidies.

This is because:

• For 2022, your out-of-pocket maximum can be no more than $9,100 for an individual plan and $18,200 for a family plan before marketplace subsidies.
• For 2022, your maximum deductible is the same as the out-of-pocket maximum.

NOTE: See Notice of Benefit and Payment Parameters for 2023 for final levels.

For 2022 Plans:

Your deductible can be no more than $8,700 for an individual plan and $17,400 for a family plan before marketplace subsidies.

This is because:

• For 2022, your out-of-pocket maximum can be no more than $8,700 for an individual plan and $17,400 for a family plan before marketplace subsidies.
• For 2022, your maximum deductible is the same as the out-of-pocket maximum.

TIP: See Notice of Benefit and Payment Parameters for 2022 for final levels.

For 2021 Plans:

• For 2021, your out-of-pocket maximum can be no more than $8,550 for an individual plan and $17,100 for a family plan before marketplace subsidies.
• For 2021, your maximum deductible is the same as the out-of-pocket maximum.

TIP: See Notice of Benefit and Payment Parameters for 2021 for final levels.

NOTE: Deductible limits are subject to change each year.

How Do Health Insurance Deductibles Work?

Most out-of-pocket costs covered by your plan count toward your deductible when you pay them. Other covered services without cost sharing before your deductible also count toward your deductible. Once you reach your deductible limit within a policy period, your coinsurance kicks in and your plan starts to pay its share of covered costs (coinsurance). Once you reach your out-of-pocket maximum, all covered costs are paid by your insurer!

How Does ObamaCare Affect Deductibles?

Under ObamaCare, Major Medical plans must meet certain cost-sharing requirements and can’t have deductibles higher than maximum out-of-pocket limits.

These limits are slightly lower on HSA eligible plans. Depending on your income and plan you choose, deductibles can be lower, but not higher than those amounts. This applies only to in-network deductibles.

ObamaCare also lowers the amount of out-of-pocket spending you are responsible for in a year by capping out-of-pocket maximums between 100% – 250% of the poverty level (deductible can never exceed a plan’s maximum).

FACT: Many who purchase a major medical plan through the health insurance marketplaces qualify for cost-sharing reduction subsidies (CSR) which lowers the actual out-of-pocket costs (deductibles, copays, and coinsurance) paid by enrollees. If CSR subsidies are discontinued, millions will face out-of-pocket costs previously paid for on their behalf for care received.

Cost Sharing Reduction Subsidies and Deductibles

Tax credits won’t lower your deductibles, but both Cost-Sharing Reduction subsidies and Medicaid will. Your deductible can never be higher than your out-of-pocket maximum.

Actuarial value with Cost Sharing Reduction Subsidies

Actuarial value is the average amount of covered costs a plan will pay. It helps both insurers and you determine how good a plan’s cost sharing is and this can relate to your deductible as it is an out-of-pocket cost. Cost-sharing reduction subsidies increase the actuarial value of a plan, meaning that you’ll have lower out-of-pocket costs for things like deductibles, copays, and coinsurance. Cost-sharing reduction subsidies are only offered on Silver marketplace plans, which typically have an actuarial value of 70%.

We’ve also included limits for out-of-pocket maximums based on income. Since your deductible can never be higher than your maximum, this is worth noting.

Income Level Actuarial Value (the payment that a Silver plan will make due to cost-sharing reduction subsidies for % of the Poverty Level).

100-150% FPL = 94% Actuarial Value

150-200% FPL = 87% Actuarial Value

200-250% FPL = 73% Actuarial Value

More than 250% FPL = 70% Actuarial Value

Out-of-pocket maximum limits:

TIP: 2017 – 2018 numbers are used below to offer examples, your exact savings are calculated at the marketplace each year.

• 100-150 percent of FPL  – 94% Actuarial Value and:
  • the out-of-pocket limit is $2,350 for an individual in 2017 ($7,350 for 2018 if CSR is not funded).
  • the out-of-pocket limit is $4,700 for a family in 2017 ($14,700 for 2018if CSR is not funded).
• 150-200 percent of FPL  – 87% Actuarial Value and:
  • the out-of-pocket limit is $2,350 for an individual in 2017 ($7,350 for 2018 if CSR is not funded).
  • the out-of-pocket limit is $4,700 for a family in 2017 ($14,700 for 2018if CSR is not funded).
• 200-250 percent of FPL  – 73% Actuarial Value and:
  •  the out-of-pocket limit is $5,700 for an individual in 2017 ($7,350 for 2018 if CSR is not funded).
  • the out-of-pocket limit is $11,400 for a family in 2017 ($14,700 for 2018if CSR is not funded).
• More than 250% percent of FPL  – 70% Actuarial Value and:
  • the out-of-pocket limit is $7,150 for an individual in 2017 ($7,350 for 2018).
  • the out-of-pocket limit is $14,300 for a family in 2017 ($14,700 for 2018).

What is Considered a High Deductible Health Plan (HDHP)

A High Deductible Health Plan (HDHP) is a plan that has a high enough deductible it qualifies for a Health Savings Account (HSA), but this isn’t the only criteria for HSA eligible plans.

For a high deductible plan to qualify for HSA eligibility it must:

1. Meet the minimum High Deductible limit which is adjusted annually.
2. Not exceed the maximum Out-of-Pocket Max limits which are adjusted annually.
3. It must not provide any additional benefits except for Preventative Care before the deductible is met (including cost-sharing like copays).

There are some exceptions to this rule, but insurers are required to tell you if a plan is HSA eligible.

High Deductible Health Plans (HDHP) and HSAs

If you don’t use a lot of medical services, you may want to consider a High Deductible Health Plan (HDHP) paired with a Health Savings Account (HSA). This will allow you to deposit and spend tax-free dollars on out-of-pocket medical expenses, can lower your tax bracket, and can qualify you for more cost assistance on the Marketplace.

You’ll pay most of your out-of-pocket costs yourself and typically will have the same deductible as the out-of-pocket maximum. Your premium will be less than a higher deductible plan, so essentially you will pay less and rely less on your insurer. HDHP’s can be intimidating due to the out-of-pocket costs, but the tax advantages of an HSA often outweigh the upfront costs. As a result, people may pay less over time. You can get the details on HDHPs and HSAs here.

Deductibles and Policy Periods

Your deductible resets every policy period. Keep this in mind as timing can affect how much your plan pays. If you start a plan late in the year, you may want to go with a very low or very high deductible plan, as you may not have a full year to take advantage of your deductible. A typical marketplace plan starts on Jan 1st and ends on Dec 31st. Make sure to enroll in a plan by December 15th each year so that your coverage begins January 1 of the following year and allows you to take advantage of a full policy period.

FACT: If you drop your plan, switch it, or don’t make a payment, you could be out of your deductible and other out-of-pocket costs. If you need to change plans mid-year, try to stay with the same provider and see if they will rollover your out-of-pocket costs.

Deductibles and Networks

If you shop out-of-network, your out-of-pocket costs may not be applied to your deductible. In other cases, they will be applied at a lower rate. In still other cases, you will have a separate out-of-network deductible. Look at your benefit summary to understand what services are covered and what services are covered in-network and how your plan treats out-of-network cost-sharing.

Deductibles and Premiums

Low deductible plans tend to have a high premium; high deductible plans tend to have a low premium. Your premium payments do not count toward your deductible.

Deductibles and Coinsurance

Your coinsurance typically won’t kick in until you have met your deductible. On a high deductible plan, your deductible might be the same as your out-of-pocket maximum, so coinsurance may never even be a factor.

Your coinsurance is typically a percentage (unlike a copay which is a fixed amount). The amount you pay over what your insurer covers continues to go toward your out-of-pocket maximum, even after your deductible has been met.

Deductibles and Copays

Some plans offer copays, which is a set amount you pay for a service. A copay will usually be offered before you reach your deductible, but not always. The amount you pay in copays for covered services typically goes toward your out-of-pocket maximum, but not your deductible (although you can always check your plans benefit sheet for specifics). Copays are not the same as coinsurance.