What does the term "deductible" mean in health insurance?

The term "deductible" in health insurance refers to the amount of out-of-pocket expenses that a policyholder must pay before their insurance coverage starts to contribute to expenses. Essentially, it is the threshold that must be crossed for the insurance to kick in. For instance, if a health insurance policy has a deductible of $1,000, the insured individual must cover that initial $1,000 in medical costs before the insurance company will begin to pay its share of expenses.

Understanding deductibles is crucial for policyholders, as it directly impacts their financial responsibility in terms of healthcare costs. It helps individuals anticipate what portion of their medical expenses they will need to manage personally before receiving benefits from their insurance plan. This structure encourages individuals to think about their healthcare usage and manage costs, as they are financially responsible for those initial expenses.