What is a deductible?

"[The definition of a deductible is:] The portion you must pay each calendar year before the insurance will begin to provide benefit payments. Most insurance plans use a "Calendar Year" for the deductible period. Some insurance companies go by the policy year anniversary, not calendar year date," defines Cindy J. Holtzman, Director of Operations at Medical Billing Advocates of America (MBAA). A deductible is an out of pocket expense. Basically, your insurance doesn't kick in until you have paid the entire deductible amount. Find out when your deductible year begins and ends, so you can keep track of your out of pocket medical expenses. This way you can guarantee and prove that you have met your deductible should there be any dispute on when your medical insurance benefits begin to apply. Generally, that isn't a problem, but it's best to keep record just in case.

"Be aware, some insurance policies may have a "Deductible Per Incident" which means, for each different illness or injury, you will be responsible for a deductible every time the condition is different," warns Ms. Cindy J. Holtzman. This would require a lump sum of money upfront for every time a medical incident occurs. A policy with this clause would not be advisable for a family since children tend to be accident-prone.

"Usually, the deductible does not apply for a visit to the doctor's office, very often that is a set co-payment. Deductibles are usually applied to these types of services: Inpatient hospital stay, outpatient surgery, physical therapy, out of network services, ambulance, and other services listed in the policy specifications," Ms. Holtzman deciphers. For regular doctor appointments you wouldn't need to be concerned about your deductible so don't avoid a necessary check up for fear you'd be paying the whole expense out of pocket. Though check your specific policy details before scheduling that appointment.

"The higher your deductible is, the lower your monthly premium is, the more the member pays out of their own pocket for large claims," explains Ms. Holtzman. While a lower monthly premium may be enticing, remember that you will be making up the difference when it comes time to pay the bill from the hospital or other medical service provider. While we all like to think that we won't need medical services, more often than not within a year's time you or a family member will need some sort of health care. This fact should be planned into your financial budgeting, since health (or lack thereof) most certainly affects finances.

Ms. Cindy J. Holtzman unveils a commonly unknown fact about deductibles. "Carryover Deductible: Any eligible services and charges, preformed during the last three months of a calendar year, that have applied to that year's deductible, can be carried over and credited and apply toward the next year's deductible, when plans renew January 1 and a new deductible will start. Most consumers are unaware of this feature. Usually this information is stated in the policy but can vary from state to state. In Georgia, it is included with all insurance policies."