What Counts Toward Your Health Insurance Deductible?

Taking care of insurance paperwork and healthcare deductibles

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Your health insurance deductible and your monthly premiums are probably your two largest health care expenses. Even though your deductible counts for the lion’s share of your health care spending budget, understanding what counts toward your health insurance deductible, and what doesn’t, isn’t easy.

The design of each health plan determines what counts toward the health insurance deductible, and health plan designs can be notoriously complicated. Health plans sold by the same health insurer will differ from each other in what counts toward the deductible. Even the same plan may change from one year to the next. You need to read the fine print and be savvy to understand what, exactly, you'll be expected to pay, and when, exactly, you'll have to pay it.

What Counts Toward Your Health Insurance Deductible

Money gets credited toward your deductible depending on how your health plan’s cost-sharing is structured. There are lots of ways cost-sharing can be structured, but most fall into two main design categories.

The “You Pay First, Insurance Pays Later" Design

Your health insurance might not pay a dime toward anything but preventive care until you’ve met your deductible for the year. Before the deductible has been met, you pay for 100% of your medical bills. After the deductible has been met, you pay only copayments (copays) and coinsurance until you meet your plan's out-of-pocket maximum; your health insurance will pick up the rest of the tab. 

In these plans, usually any money you spend toward medically-necessary care counts toward your health insurance deductible as long as it’s a covered benefit of your health plan and you followed your health plan's rules regarding referrals, prior authorization, and using an in-network provider if required.

Although you're paying 100% of your bills until you reach the deductible, that doesn't mean you're paying 100% of what the hospital and doctors bill for their services. As long as you're using medical providers who are part of your insurance plan's network, you'll only have to pay the amount that your insurer has negotiated with the providers as part of their network agreement. So although your doctor might bill $200 for an office visit, if your insurer has a network agreement with your doctor that calls for office visits to be $120, you'll only have to pay $120 and it will count as paying 100% of the charges (the doctor will have to write off the other $80 as part of their network agreement with your insurance plan).

The “Deductible Is Waived for Some Services” Design

In this plan type, your health insurance picks up part of the tab for some non-preventive services even before you’ve met your deductible. The services that are exempted from the deductible are usually services that require copayments. Whether or not the deductible has been met, you pay only the copayment. Your health insurance pays the remainder of the service cost.

For services that require coinsurance rather than a copayment, you pay the full cost of the service until your deductible has been met (and again, "full cost" means the amount your insurer has negotiated with your medical provider, not the amount that the medical provider bills). After the deductible has been met, you pay only the coinsurance amount; your health plan pays the rest. 

In these plans, the money you spend toward services for which the deductible has been waived usually isn't credited toward your deductible. For example, if you have a $35 copayment to see a specialist whether or not you've met the deductible, that $35 copayment probably won't count toward your deductible.

However, this varies from health plan to health plan; so, read your Summary of Benefits and Coverage carefully, and call your health plan if you’re not sure.

Remember, thanks to the Affordable Care Act, certain preventive care is 100% covered by all non-grandfathered health plans. You don’t have to pay any deductible, copay, or coinsurance for covered preventive health care services you get from an in-network provider.

Once you meet your out-of-pocket maximum for the year (including your deductible, coinsurance, and copayments), your insurer pays 100% of your remaining medically-necessary, in-network expenses, assuming you continue to follow the health plans rules regarding prior authorizations and referrals.

What Doesn’t Count Toward Your Health Insurance Deductible

Your out-of-pocket expenses for health care services that aren’t a covered benefit of your health insurance won’t be credited toward your health insurance deductible. For example, if your health insurance doesn’t cover cosmetic treatments for facial wrinkles, the money you pay out of your own pocket for these treatments won’t count toward your health insurance deductible.

Money you paid to an out-of-network provider isn’t usually credited toward the deductible in a health plan that doesn’t cover out-of-network care. There are exceptions to this rule, such as emergency care or situations where there is no in-network provider capable of providing the needed service. Federal rules require insurers to count the cost of out-of-network emergency care towards the patient's regular in-network cost-sharing requirements (deductible and out-of-pocket maximum), and prohibits the insurer from imposing higher cost-sharing for these services. But the out-of-network emergency medical providers are allowed to balance bill the patient in these scenarios, unless state law prohibits it. (And that's assuming the state law applies to the person's health insurance; self-insured plans are not regulated at the state level, and they account for the majority of employer-sponsored coverage.)

Health plans that allow out-of-network care, usually PPOs and POS plans, may differ as to how they credit money you paid for out-of-network care. You may have two separate health insurance deductibles, one for in-network care and another larger one for out-of-network care. In this case, money paid for out-of-network care gets credited toward the out-of-network deductible, but doesn’t count toward the in-network deductible unless it's an emergency situation.

One caveat: if your out-of-network provider charges more than the customary amount for the service you received, your health plan may limit the amount it credits toward your out-of-network deductible to the customary amount, even though the out-of-network provider is allowed to bill you for the remainder of their charges (since they have no network agreement with your insurer, they're not obligated to write off any portion of the bill).

Copayments generally do not count toward the deductible. If your health plan has a $20 copay for a primary care office visit, the $20 that you pay will most likely not count towards your deductible. However, it will count towards your maximum out-of-pocket on almost all plans (some ​grandmothered and grandfathered plans can have different rules in terms of how their maximum out-of-pocket limits work).

Monthly premiums don't count toward your deductible. In fact, premiums aren't credited toward any type of cost-sharing. Premiums are the cost of buying the insurance. They're the price you pay the insurer for assuming part of the financial risk of your potential health care expenses. You have to pay the premium each month, regardless of whether you need health services that month or not.

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