What is a deductible in health insurance?

A deductible is the amount that a policyholder must pay out-of-pocket for healthcare services before their health insurance begins to contribute to the costs. It's an essential concept in health insurance because it sets a threshold that individuals must meet before receiving financial assistance from their insurer. For example, if a health plan has a deductible of $1,000, the policyholder must pay that amount for covered services before the insurance company starts to cover the remaining costs.

This structure encourages insured individuals to take responsibility for their initial healthcare expenses and can affect the overall cost of insurance premiums; plans with higher deductibles often have lower monthly premiums. Understanding deductibles is crucial for consumers to manage their healthcare costs effectively, as it helps them prepare for out-of-pocket expenses associated with their health insurance coverage.