What Is a Deductible?

One of the most misunderstood terms in health insurance is the deductible.

Many people assume it's the amount they pay every year regardless of whether they use healthcare.

That's not how it works.

What Is a Deductible?

A deductible is the amount an employee generally pays before the health plan begins sharing the cost of covered services.

Example:

Annual deductible: $2,000

If an employee incurs $2,000 in eligible medical expenses, they generally pay those costs first.

After the deductible is met, the plan begins paying according to the benefit design.

Do All Services Apply to the Deductible?

No.

Many plans cover certain services before the deductible, including:

• Preventive care
• Annual wellness exams
• Certain vaccinations
• Some office visits

Every health plan is different.

Why Do Plans Have Deductibles?

Deductibles help:

• Keep monthly premiums lower.
• Encourage thoughtful healthcare utilization.
• Share costs between the employer, insurance company, and employee.

Generally speaking:

Higher deductible = Lower premium

Lower deductible = Higher premium

Is a $0 Deductible Better?

Not always.

While employees appreciate lower deductibles, plans with no deductible usually cost more each month.

Employers must balance affordability with employee financial protection.