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

The term "deductible" in health insurance refers to the amount that an insured individual must pay out-of-pocket for healthcare expenses before their insurance coverage starts to contribute. This means that the deductible is a threshold that must be met by the policyholder prior to the insurer covering any of the costs. For example, if a health insurance plan has a deductible of $1,000, the insured must pay this amount for medical services each year before the insurance begins to pay for covered expenses.

Understanding the concept of a deductible is crucial because it affects how much individuals need to budget for healthcare costs annually. Once the deductible is met through eligible medical expenses, the insurer typically begins to share subsequent costs according to the terms of the policy, often involving coinsurance payments. This allows for a balance of cost-sharing between the insurer and the insured.