Let's talk about deductibles

Everyone I talk to is confused about insurance deductibles. Here’s how it works.

The deductible means you to pay the full, “negotiated” cost of your care up front before the usual cost sharing kicks in. So if you go to urgent care, for example, you’d pay for that service yourself, perhaps a few hundred dollars. Once you’ve paid for services equal to the deductible, you only pay a copay, like $20, or a percent of care costs going forward.

Notice I said negotiated price. Once you join a plan, you have immediate access to the negotiated price the plan contracted with your doctors for its customers. You don’t pay the full “Charge Master,” uninsured price.

Here’s why deductibles exist.

Most people are moderate users of healthcare and prescriptions. They do routine things, take a few medications. Nothing dramatic. Most people never get anywhere near the annual out of pocket cost maximum for their plan. But a few people do. They have a poor health year, and the insurance company pays more.

The insurance company uses the deductible to get money up front to subsidize catastrophic care for those few people who need more. In aggregate, the math works out.

Still have questions? Let’s talk!