So, I am looking for a new health insurance and I am seeing alot of deductible and Out of pocket but idk how they are different. Like, I understand that prescription and visits go to your deductible but what go to your Out of pocket
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In health insurance, you have a deductible and an OUT OF POCKET MAXIMUM.
Under covered services, you have a deductible. This is an amount of money you must pay before insurance covers anything for that care.
After the deductible is paid, insurance will usually pay 70%+ for all of the care depending on co-pay/co-insurance. You would pay the rest.
This holds true UNTIL you reach an OUT OF POCKET MAXIMUM. At this point, you have paid all you can and the insurance company will cover 100% for the covered service.
An example plan would be a 1000 deductible with a 10000 out of pocket maximum.
You pay 1000 before insurance covers anything, then you share expenses (usually something like 70/30 to 90/10 split) until you get to 10000 dollars, your max. From there, insurance covers everything.
Deductible: This is the amount of money you have to pay out of your own pocket for your medical bills before your health insurance starts to help. For example, if your deductible is $1,000, you need to pay the first $1,000 of your medical bills in a year. After you’ve paid that, your insurance starts to cover a portion of your bills.
Out-of-Pocket Maximum: This is the most you’ll have to pay yourself for covered medical services in a year. It includes your deductible plus other costs like copayments and coinsurance. Once you’ve paid this amount, your insurance covers 100% of your covered medical expenses for the rest of the year.
Deductible is what you pay first
Out-of-pocket maximum is the most you’ll ever have to pay in a year.
Answer: Deductible is how much your insurance company wants you to pay first. After the deductible, you often have a “copay”. That’s the portion of medical bills that you have to pay while the insurance company pays the rest. Often, it’s 20% meaning that if you have a $100 bill from a doctor AFTER you’ve met your deductible, you pay $20 and the insurance company pays $80. Your “Out of pocket Max” is the maximum amount the insurance company will make you pay before they start paying 100% of everything.
Say you have a plan where your deductible is $3,000, your copay is 20% after deductible, and your OOP Max is $4,000.
You have shoulder surgery and the bills come to $50,000 total. The first thing that happens is that the insurance company tells the provider “I know you billed $50,000 for this, but the contract we have with you says that you’d be happy getting $12,000 for the work you did so that’s what you’re going to be paid.” That $38,000 reduction is an insurance adjustment and you don’t have to worry about any of that.
Now the bill is $12,000. Your deductible is $3,000 so you have to pay the first $3000. That leaves $9,000 left. With your 20% copay, that means you’re responsible for 20% of the next $5,000 worth of bills to get you from the $3,000 deductible up to paying your $4,000 OOP Max. That leaves another $4,000 owed to the provider but at this point, since you’ve met your OOP Max, the insurance company pays the rest of the bill. So… to sum up:
$50,000 shoulder surgery
– $38,000 insurance adjustment
– $3,000 deductible that you pay
– $1,000 20% copay that you pay (total you have paid = $4,000 or OOP Max)
– $4,000 80% copay that the insurance company paid
– $4,000 100% coverage that the insurance company paid since you met your OOP Max
$0 due.
Plus, for the rest of the plan year, you’ll pay nothing since you’ve met your OOP Max for the year. And yes, I know that’s a low number for shoulder surgery. My wife just had some and the total bills came to $72,000, allowed amount after adjustments was over $18,000.
I always explain it like a two story house. The Out of Pocket max is the roof above the second floor, the Deductible is the first story ceiling.
Once you meet the costs for the deductible you usually only pay 15 or twenty cents on the dollar and the plan pays the other 80-85% for in network covered services.
Once you meet the out of pocket the plan pays 100% of in network covered charges.
The deductible is included in the out of pocket max. They usually only apply to major services unless you are in a high deductible plan. Think hospitalization surgery MRIs not every day doctor visits or prescriptions.
Example – you have a $10,000 hospital bill with a $2,000 deductible and $5,000 out of pocket max.
Assume you are in network for this scenario and coinsurance is 80/20.
You pay $2,000 and then the plan pays 80% after that and you’re only paying 20% of the balance.
$10k minus $2k leaves $8k. Of that you pay 20 cents on the dollar or $1,600.
$2k plus $1.6k equals 3.6k toward your out of pocket. As you can see it takes a lot to meet a maximum.
Often doctor visit copays and prescriptions apply to the out of pocket max but not the deductible.
Think of insurance like a shield. You have to absorb the cost (and pay premium for the coverage) to the deductible threshold and then the plan kicks in to help you 80% paid by them and 20% paid by you. You have a maximum so (hopefully) you can’t go bankrupt.
We often shop for medical benefits based on copays and the network, but the main reason you want it is to keep from a catastrophic loss.
More expensive plans per paycheck tend to have lower deductibles and less expensive plans per paycheck tend to have higher ones. High deductible health plans with HSA is a great way to go if you are good at budgeting and / or if your company matches your contributions.
You may want to request a plan comparison chart or Summary of Benefits and Coverage. They often have examples at the back to help illustrate how the plan works
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