Health insurance policies typically have a deductible ranging from nothing to several thousand dollars. The deductible is the amount an insured person must pay before the insurance company pays some or all of their covered medical expenses. Let’s look at an example:
Suppose John has a plan with a $2,000 deductible. He’ll have to pay all of his medical expenses up to the deductible amount before his insurance company will pay out. One bit of good news is that John could benefit from the negotiated rates between the insurance company and John’s doctor. The doctor may bill the insurance company $400 for John’s office visit and physical exam, for example, but the “allowable amount” (the negotiated rate between the doctor and the insurance company) may only be $300. Since John must pay all expenses up to the deductible, the doctor will bill John directly for the $300 negotiated rate.
You may be asking yourself what good a health insurance plan is if you have to pay so much before the insurance kicks in. The simple answer is that health plans, regardless of the deductible amount, are important for covering emergency services, hospitalizations, and serious injuries.
Consider that the average cost of a week-long stay in the U.S. ranges anywhere from to $11,375 to $14,175.1 That doesn’t include surgery, radiology tests such as MRIs and ultrasounds, laboratory work, and other expenses a person might incur while hospitalized. An unexpected hospitalization or emergency—even something as relatively minor as a broken arm—could easily lead to financial problems or bankruptcy for an uninsured person.
Higher deductible plans typically have a lower monthly premium and are ideal for those who don’t need to see a doctor regularly for a medical condition. Subscribers of a high-deductible plan get the benefit of a lower premium with the catastrophic protection people of every age need.
In future posts we’ll take a look at annual out-of-pocket maximums, coinsurance and copayments, and prescription drug coverage, all of which are standard parts of most California health insurance policies.
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