How Deductibles Work

Understanding Your Deductible
Deductibles can seem overwhelming whether large or small. But when you understand how they work, you can better plan for your health care expenses. So what are the basics of deductibles?

A deductible is a fixed amount you must pay before your health plan begins to pay your bills. For example, if your "per-person" deductible is $500, you'll pay the first $500 of health care expenses. After that, your health plan will cover most or all of any remaining eligible expenses.

With most plans, preventive care is not subject to the deductible, but deductibles do generally apply to certain other health care services including diagnostic tests and inpatient care. Your plan documents will detail the specifics.

One way to reduce the cost of your deductible is by taking advantage of personal spending accounts such as a Health Savings Account (HSA), or Flexible Spending Account (FSA) your employer offers. With these kinds of accounts, you can make pre-tax deposits to a special account; then you can use that money to cover many out-of-pocket expenses.