Understanding how health insurance works can be confusing, especially when it comes to covering your entire family. There are numerous restrictions, guidelines, and rules that can change each year or when you switch plans. While you may be familiar with health insurance premiums, there are other expenses to consider, such as deductibles and out-of-pocket costs. In this article, we’ll explore the difference between these two terms, how they work, and provide some tips on saving money on healthcare.
Health Insurance Deductible: What is it?
A health insurance deductible is the amount you must pay out of your own pocket before your insurance provider starts covering your medical expenses. For instance, if your deductible is $2,000, you’ll need to spend that amount on covered services before your insurance kicks in. Generally, the higher your insurance premium, the lower your deductible.
Understanding Out-of-Pocket Maximum
The out-of-pocket maximum is the maximum amount you’ll have to pay before your insurance covers 100% of your medical bills. The federal government sets the out-of-pocket maximum, which, in 2022, cannot exceed $8,700 for individual plans and $17,400 for family plans. This maximum applies to all types of health insurance coverage, whether obtained through an employer, insurance exchange, or private broker. Although the out-of-pocket maximum may seem high, it provides significant protection for families facing serious medical conditions.
Deductible vs. Out-of-Pocket Expenses: What’s the Difference?
Differentiating between the deductible and out-of-pocket costs can be confusing since spending money to meet your deductible is also considered an out-of-pocket expense. To better understand this, let’s look at how each term works.
How Does the Deductible Work?
To meet your deductible, you must pay for specific services out of your own pocket until you reach the deductible amount set by your insurance policy. Once you’ve reached your deductible, your insurance will cover an agreed percentage of your medical bills, and you’ll still be responsible for your portion of the bill. The percentage of coverage varies based on the metal level of your insurance plan:
- Bronze: Insurance pays 60% and you pay 40%.
- Silver: Insurance pays 70% and you pay 30%.
- Gold: Insurance pays 80% and you pay 20%.
- Platinum: Insurance pays 90% and you pay 10%.
After meeting your deductible, you’ll continue to pay your share of healthcare costs until you reach your out-of-pocket maximum.
How Does the Out-of-Pocket Maximum Work?
Your out-of-pocket costs include deductibles, copays, and coinsurance payments. However, they do not include monthly health insurance premiums or bills for out-of-network care. Once you reach your out-of-pocket maximum, which resets each calendar year, your insurance company will cover 100% of your in-network medical expenses. In general, the lower your responsibility for bills, the higher your insurance premium, and the lower your deductible.
Tips to Save on Healthcare Costs
Here are some practical tips to help you save money on healthcare expenses:
Sign Up for a Health Savings Account (HSA)
Contribute pre-tax dollars to an HSA and use the funds to pay for qualified medical expenses. You can also invest the money to earn interest and grow your savings.
Track Medical Expenses for Tax Deductions
If your medical expenses exceed 7.5% of your gross income, you may qualify for a tax deduction. Keep track of your expenses and consult a tax professional for guidance.
Choose Outpatient Care When Possible
Certain procedures can be performed on an outpatient basis, which can be more cost-effective than a hospital stay. Consult with your doctor to explore outpatient options.
Stick to In-Network Providers
Always ensure that your doctor and other healthcare professionals are covered by your insurance plan. Out-of-network care can result in unexpected bills. Use your insurance company’s provider directory or reach out to their customer service for assistance.
Explore Prescription Drug Options
Opt for generic medications whenever possible as they tend to be more affordable. Consider signing up for a prescription drug delivery service that offers discounts on larger orders. Additionally, ask your doctor if it’s possible to get prescriptions for a three-month supply rather than monthly refills.
Consider Catastrophic Coverage
If you’re young, healthy, and predict few medical needs, catastrophic coverage with low premiums and a high deductible might be a suitable option.
How K Health Can Help
If you require urgent care but don’t have insurance, K Health is here for you. With K Health’s AI-powered app, you can check your symptoms, explore conditions and treatments, and even text with a healthcare provider in minutes. K Health’s app is HIPAA compliant and backed by 20 years of clinical data.
Understanding the nuances of health insurance can be overwhelming, but by grasping the difference between deductibles and out-of-pocket costs, and following the tips to save on healthcare expenses, you can navigate the system with confidence and make informed decisions about your healthcare.