Your health insurance deductible and your monthly premiums are probably your two largest healthcare expenses. Even though your deductible counts for the lion’s share of your healthcare spending budget, understanding what counts toward your health insurance deductible, and what doesn’t, isn’t always easy.
This article will help you understand what you need to know about health insurance deductibles and how your medical expenses are counted.
Not every health plan is designed the same way. Each plan will decide what services will require you to pay toward the health insurance deductible before the plan's coverage kicks in. Health plans sold by the same health insurer can 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.
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What Counts Toward the 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.
Key Terms
Cost Sharing
You share costs with your health plan. You pay a coinsurance or copayment/copay and your plan pays the remaining amount. Cost sharing refers to your out-of-pocket costs.
Plans Where You Pay First, Insurance Pays Later
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 coinsurance (or copayments—copays—although that's less common with this type of plan design) until you've met 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 healthcare providers 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.
Although your healthcare provider might bill $200 for an office visit, if your insurer has a network agreement with your healthcare provider 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 healthcare provider will have to write off the other $80 as part of their network agreement with your insurance plan).
An HSA-qualified high deductible health plan (HDHP) is an example of a plan that works like this. With the exception of certain preventive care, all charges are paid by the patient until the deductible is met. The health plan only starts to pay for care after that point.
Plans With the Deductible Waived for Some Services
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 excluded from the deductible are usually services that require copayments. Whether or not the deductible has been met, you pay only the copayment for those services. 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.
Examples of plans like this include what you might think of as a "typical" health insurance plan, with copays for office visits and prescriptions, but a deductible that applies to larger expenses such as hospitalizations or surgeries.
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; read your Summary of Benefits and Coverage carefully, and call your health plan if you’re unsure.
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 healthcare 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. (Note that this works differently for inpatient care if you have Original Medicare).
The Deductible and Your Out-of-Pocket Maximum
In addition to your deductible, your health plan will have an out-of-pocket maximum amount. (There are some exceptions; health plans that aren't regulated by the Affordable Care Act, such as short-term health insurance, might not have a maximum out-of-pocket limit. Original/Traditional Medicare also doesn't have a limit on out-of-pocket costs although Medicare Advantage plans do.)
Major medical health plans with effective dates of 2014 or later are required to have out-of-pocket limits that don't exceed $9,450 for a single person in 2024. This amount is adjusted by the federal government each year; health plans can have out-of-pocket limits below this amount, but not above it.
Your health plan's deductible can be any amount that ranges from as low as $0 to as high as the maximum allowed out-of-pocket limit.
Catastrophic health plans have deductibles that are exactly the same as the maximum allowable out-of-pocket cap.
High-deductible health plans (HDHPs), which are specifically regulated by the IRS, have out-of-pocket limits that are lower than other plans. So their deductibles are also limited by the fact that they can't exceed the upper out-of-pocket limits for those plans.
What Doesn’t Count Toward the Deductible
There are several healthcare expenses that usually don't count towards the deductible.
Not Covered Benefit
Your out-of-pocket expenses for healthcare 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 bariatric surgery or infertility treatments or vasectomies, the money you pay out of your own pocket for these services won’t count toward your health insurance deductible.
Out-of-Network Care
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 prohibit the insurer from imposing higher cost-sharing for these services.
And since 2022, the federal No Surprises Act has prohibited out-of-network providers from balance billing when you receive emergency care or when you get care at an in-network facility but unknowingly received care from an out-of-network provider during the visit. Because out-of-network providers did not negotiate a contract with your health plan ahead of time, they can bill at higher rates than in-network providers. They could to try to "balance" the bill by having you pay the difference, whatever the insurance company did not. Thankfully, the No Surprises Act was enacted to protect patients who did not have a choice (an emergency is an emergency) or were not notified about out-of-network care.
Health plans that cover out-of-network care in other circ*mstances, 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 allowed customary amount for the service you received, your health plan will typically limit the amount it credits toward your out-of-network deductible to the customary amount.
This is done 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). However, as noted above, this is no longer allowed for emergency care or situations in which a patient receives treatment from an out-of-network provider at an in-network hospital.
Copayments
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-pocketon almost all plans (some grandmothered and grandfathered plans can have different rules in terms of how their maximum out-of-pocket limits work).
Premiums
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, and regardless of whether you'd met your maximum out-of-pocket limit for the year. If you stop paying your premiums, your health insurance will lapse and you'll no longer have coverage.
Summary
A health insurance deductible is the amount that you have to spend on certain services before your health plan will start to cover any of the cost of those services. The specific amount of the deductible will vary significantly from one plan to another. And the types of services that are subject to the deductible will also vary; some plans apply the deductible to nearly all services, while others will cover a wide range of services with copays even before the deductible (used for other services) is met.
A Word From Verywell
When you're comparing health plans, the deductible is an important factor to keep in mind. But you'll also want to pay close attention to what services—if any—the plan will cover with copays instead of requiring you to pay for them via the deductible.
Some health plans have very low deductibles but fairly high out-of-pocket maximums, so you'll need to understand how much you might have to pay in coinsurance after you meet the deductible. Depending on the plan, you might find that you're better off with a plan that has a higher deductible, if the total out-of-pocket costs are lower. This is particularly true if the monthly premiums are also lower, since you have to take the total cost—premiums plus out-of-pocket expenses—into consideration when you're picking a health plan.
