What Are Deductibles?
The Short Answer: Deductibles are a major part of any health plan. The deductible amount for your health plan is the amount of money you must pay for healthcare in one year before you insurance company pays (instead of you). For 2020, the minimum deductible that qualifies for a Health Savings Account (HSA) is $1,400 for an individual and $2,800 for a family. That is a common threashold for most employers. Now, there are a lot of caveats, but that is the short version.
A lot of the deductible depends on the plan. An example explains it the best.
If your plan has a $2,400 deductible, that means, you personally have to pay $2,400 total each year on medical services (going to the doctor, drugs, scans, etc.) before your insurance will start to pay. That means if you see the doctor 10 times and pay $100 each time ($1,000), and have blood tests and a scan for another $1,400, you won’t pay anything aftert that for that year. This is because you spent $2,400 of your own money.
Now for the caveats.
Co-pays: Lots of insurance plans have Co-pays. In short a Co-pay is when you pay a set amount each time you have some medical service and your insurance company pays the rest. Sometimes Co-pays count towards your deductible, sometimes they don’t. If the Co-pay does count towards your deductible, that means if you have a $10 Co-pay (which means your insurance company pays the other $90) to see the doctor, you would have to see the doctor 100’s of times before your insurance company pays for all of it. If the Co-pay does not count towards your deductible, that means you can see the doctor and pay the $10 Co-pay as much as you want, and your insurance will never pay for all of it because you will never reach your deductible amount. Sometimes, depending on the plan, even if you meet your deductible, for some services, Co-pays or Co-insurance is still required.
Co-insurance: Many insurance plans have co-insurance. Co-insurance is where you split the cost with the insurance company for specific services like hospitalization. A co-pay is usually a dollar amount while Co-insurance is a percent of the total service cost. For our above examples, if your plan has 30% Co-insurance and you are admitted to the hospital for 2 days for $2,400 (after having met your deductible for that year), you will have to pay 30% ($720) and your insurance will pay 70% ($1,680). This may be limited by your ‘Out-of-Pocket Maximum’ but it depends on your plan. Check your plan to see what services are subject to Co-insurance.
Out-of-pocket maximums: Out-of-pocket maximums are different from deductibles. For more details on the out-of-pocket maximums, go here <>. Out-of-pocket spending is tracked separately from your deductible. It is possible that you’ve met your deductible (paid $2,400 of your own money), but not met your out-of-pocket maximum. In that case, you may still have to pay co-pays and Co-insurance, so your insurance may still not cover everything until you reach your Out-of-pocket maximum. Out-of-pocket maximums are kind of like a second deductible that tracks different expenses.
Networks: All plans have a network of doctors that are “allowed”. If you see a doctor who is in your insurance network, the co-pays, co-insurance, out-of-pocket maximums and deductible amounts all probably work as described above. If you see a doctor who is not in your network (they still may accept your insurance, but they can be “out-of-network”) then the rules are different. Typically, you will have a higher co-pay and co-insurance if you use ‘Out-of-Network’ services. And when you use “Out-of-Network” services, that may or may not count towards your deductible. You will need to check you plan to know how that is treated. Also, ‘Out-of-Network’ expenses may not count towards your out-of-pocket maximum, again you have to check you plan details. All of this is only significant if you reach your deductible or ‘Out-of-Pocket Maximum’ in any given year. If you are unlikely to reach your deductible, paying cash makes sense because you save so much.
It’s all very complicated. That’s on purpose. By being complicated, insurance companies can get you to pay more and save less.
How can uMed help?
There are certain plans we favor, we call them cliff plans because the deductible is like a cliff: up to the deductible nothing is covered, then after the deductible is met everything is covered. There are no co-pays, no co-insurance, no complex tracking of deductible vs out-of-pocket maximums. Cliff plans are the most straightforward to manage. Up to the deductible amount ($2,400 in our above example), nothing is covered. You are responsible for every cost up to your deductible. Once you meet the deductible ($2,400 in our example), everything is covered 100% by your insurer. Cliff type plans usually have high deductibles (think $5,000-$8,000 range) and have low premiums. The low premiums make them affordable, except for that high deductible (that is why you need an HSA). However, 90% of people don’t meet their deductible in any given year. Cliff plans are meant to cover you for major hospitalization and big time injuries or illnesses. With a cliff plan you are spending your own money (hopefully from an HSA) to see the doctor, so you’ll want to spend that money wisely. This is where uMedMarket helps. Before, you couldn’t shop and you paid whatever the doctor told you after the appointment. This means you may see the doctor and get charged $200 afterwards and you have no choice but to pay. So, you’re out $200. With uMed, we let you shop for that appointment and you may find it for $90. uMed just saved you $110.
Now you may think, “But $200 gets me closer to my deductible?” It does, but the likelihood of actually meeting your deductible by going to the doctor is slim (about 80% in any one year). Most people meet their deductible on cliff plans by having a major health problem, like being in the hospital.
uMedMarket works best with a cliff plan because you save on the premiums each month (which you can put into your HSA instead of giving it to the insurance company) and you save on the deductible because uMedMarket allows you to shop for better prices for care.
Remember, insurance is complicated on purpose. They want you to not understand and to over pay. uMedMarket is simple. That’s on purpose. We want you to have a simple plan that you understand and saves you money.