MedicalForNomads

Deductible Vs Out Of Pocket

deductibles vs out of pocket

Deductible Vs Out Of Pocket

How They Rob You Blind…

What the hell are deductibles and out of pockets in medical insurance, and why are they included? Well, we’d love to know why these insurance companies include them as well, and I want to warn you about the downsides of high deductibles and out of pockets. 

Quick Summary: Deductibles are payments you make before your insurance covers costs. Out-of-pocket costs are what you pay for medical care that isn’t reimbursed by insurance, including deductibles, co-payments, and co-insurance. High deductibles and out-of-pocket costs can negatively impact your healthcare, leading to unexpected expenses. Our advice is to avoid plans with deductibles to prevent out-of-pocket costs, ensuring your insurance pays from the start.

What Is a Deductible?

Overview: 

A deductible is what you pay before your insurance covers the costs. Personally, I see deductibles as a negative in insurance plans. This is because it causes more stress on your financial situation, and on your medical health as well. 

Understanding deductibles is key. They represent an extra cost to you before your insurance takes over. For us, we stand against this model. Essentially, a deductible means that even though you are insured you still need to pay to get healthcare. 

That doesn’t sound quite right to me? 

Key points:

  • Deductibles mean more out-of-pocket expenses.
  • Our insurance plans do not have deductibles.
  • Avoiding deductibles can save you money and stress.
Advice: Choose plans without deductibles. This ensures your insurance works for you from the start, without extra costs. Why get covered by an insurance plan that still makes you pay before you can get your health care?
Person paying a deductible in medical insurance

How do deductibles work?

Deductibles are the initial amount you pay out-of-pocket before your insurance starts covering costs. If you do not pay the deductible, your insurance company will not cover the cost of your health care. They will only help you, when you have paid the deductible. 

In the insurance world, deductibles are a common yet very sneaky feature. However, they represent an additional cost on you before your insurance benefits kick in. Our stance is clear: we advocate for plans without deductibles, ensuring you’re covered from the get-go.

After you have paid your deductible, you will be covered. Sometimes we’ve had customers leave their insurance plans for us because the insurer refused to pay until they had paid their deductible. During an emergency, this can delay your support as well. 

It just doesn’t quite make sense to us why you’d be required to pay for your health care every time you need something, even though you are insured. However, it’s done by many in the industry. 

Key points:

  • You pay deductibles before insurance coverage begins.
  • Preventative services might not require a deductible.
  • Deductibles can lead to unexpected expenses.
Deductible definition: A deductible is the amount you pay for healthcare services before your insurance starts to cover costs.

What Is Out Of Pocket?

Overview: 

Out-of-pocket costs are what you pay for your healthcare services, even after meeting your deductible. These can include co-payments, co-insurance, and any other cost-sharing measures between you and your insurance company.

What does this mean?

After you’ve paid your deductible, you might think your insurance will cover everything else. However, out-of-pocket costs can still apply, adding to your overall healthcare expenses. This is crazy right? What type of insurance plan still keeps making you pay?

Key points:

  • Out-of-pocket costs come after deductibles.
  • They include co-payments and co-insurance.
  • These costs can significantly affect your healthcare spending.
Advice: We do not recommend going for a medical insurance plan that comes with out of pocket costs. These are likely going to cause you a serious financial burden, and added stress on top of requiring the correct healthcare for yourself…
person handing over out of pocket money to cover healthcare costs

How does out of pocket work?

Overview: 

Even after meeting your deductible, you’re responsible for certain costs. Our approach is different. We aim to eliminate or significantly reduce out-of-pocket expenses, ensuring you’re not caught off guard by additional costs.

Examples:

Out-of-pocket costs can come in various forms:

  • Co-payments: These are fixed amounts you pay for specific services. For example, you might have to pay £20 every time you visit the doctor, regardless of whether you’ve met your deductible.
  • Co-insurance: This is a percentage of the cost for certain services that you’re required to pay after meeting your deductible. If your co-insurance rate is 20%, and the service costs £100, you would pay £20 while the insurance covers the remaining £80.
  • Non-covered services: These are costs for services that your insurance policy does not cover at all. You would need to pay 100% of these costs out of your pocket.
Advice: If you have chosen a plan that comes with out of pocket costs, then read through and understand in detail where you could be charged and what you can typically try to avoid. Please feel free to speak to us and we can help you understand your plan better, and where you might be getting ripped off.
Definition of out of pocket: Out-of-pocket costs are expenses for medical care that aren’t reimbursed by insurance. This includes deductibles, co-payments, and co-insurance.

Deductible vs Out Of Pocket Comparison Table

Feature Deductible Out-of-Pocket Maximum
Definition The amount you pay before your insurance starts covering certain medical expenses. Think of it as your “entrance fee” for coverage. The maximum amount you’ll pay in a year for covered medical services (excluding premiums). It includes your deductible, copays, and coinsurance.
How it works You pay for all covered services out-of-pocket until you reach your deductible. Once met, your insurance starts sharing costs according to the plan’s terms (copays, coinsurance). Once you and your plan contribute enough to reach the out-of-pocket maximum, your insurance covers 100% of covered services for the rest of the year.
Impact on costs Lower deductible = higher premiums, higher expenses upfront. Higher deductible = lower premiums, potentially lower overall costs if you rarely use healthcare. Lower out-of-pocket maximum = higher premiums, more predictable costs. Higher out-of-pocket maximum = lower premiums, potentially higher risk of high costs if you have major medical needs.
Who benefits Healthy individuals who rarely use healthcare, budget-conscious buyers seeking lower premiums. Individuals with chronic conditions or expecting high medical expenses, those seeking peace of mind with capped annual costs.
Considerations Carefully evaluate your expected healthcare needs and budget. Remember, preventive care is often covered before the deductible. Factor in potential out-of-pocket costs for medications, deductibles, and copays/coinsurance before reaching the maximum.

Examples of out of pocket costs in medical insurance

  • Co-payments: Imagine you visit a doctor and are charged a fixed £20 co-payment. This £20 is an out-of-pocket cost, paid each time you see the doctor, regardless of your deductible status.
  • Co-insurance: After meeting your deductible, suppose your insurance covers 80% of a £1000 medical bill. You’re responsible for the remaining 20%, which is £200. This £200 is an out-of-pocket cost.
  • Deductibles: Before your insurance coverage kicks in, you must first meet your deductible. If your deductible is £500, you pay that amount out-of-pocket for covered services. After meeting this, your insurance starts to pay.
Example of paying a medical deductible

Examples of deductibles in medical insurance

  • Annual Deductible: You have a plan with a £1000 annual deductible. This means you need to pay £1000 out-of-pocket for covered healthcare services within the year before your insurance begins to cover costs.
  • Per-Event Deductible: For each separate medical incident, you pay a deductible. If your per-event deductible is £250, and you have two different medical treatments in a year, you pay £250 for each event before insurance covers the rest.
  • Family Deductible: Your family plan has a £3000 deductible. This is the total amount your family must pay out-of-pocket for covered services before the insurance covers the costs. This deductible accumulates from all family members’ healthcare expenses.

Impact On Your Health Care

Choosing plans with high deductibles and out-of-pocket costs means you’ll pay more before your insurance helps out. This can make you think twice before going to the doctor, which isn’t good for your health. 

While your monthly insurance bill might be cheaper, you could end up paying a lot more when you need medical care. It’s important to find a balance so you’re not caught off guard by big bills and can still get the healthcare you need without stress.

So, here’s a breakdown of the impact on your healthcare when you do choose insurance plans with high deductibles or high out of pocket costs. 

Choosing between high and low deductible plans

Overview: 

Choosing between a high or a low deductible plan will affect your healthcare costs and coverage, of course (it’s slightly obvious). For example, high deductible plans often have lower monthly premiums but require you to pay more upfront. Low deductible plans have higher premiums but cover costs sooner.

What does this mean for you?

So, if you opt for a low deductible plan, this means you’ll pay more up front on your insurance, but likely never pay anything out of pocket again. 

However, if you choose high deductible plans, you will pay less upfront, but then a high amount incase of an emergency or requirement of health care services. 

Key points:

  • High deductible plans lower your monthly premiums but increase out-of-pocket costs before coverage.
  • Low deductible plans increase your monthly premiums but reduce the amount you pay out-of-pocket before insurance kicks in.
  • Your healthcare needs and financial situation should guide your choice.
Advice: If you are living overseas for a long period of time, then consider that deductibles might not suit you well. The same applies for people who get sick easily, or are injury prone. If the price is right, you should always go for a plan with low deductibles over high.
nomad stressed out by out of pocket and deductibles cost

High deductibles and living abroad

Overview: 

High deductibles can be particularly challenging for expats and global nomads. Believe it coming from me, who lives overseas. Living abroad often means navigating unfamiliar healthcare systems and potentially facing unexpected medical costs.

If you are living in popular expat locations like South East Asia, South America, Africa, Europe then you will probably know that there is always a risk of accidents, viruses, and other strains on your health. 

What does it mean for you? 

If you do require health care and the country you live in has an expensive private healthcare system, then you will likely want to avoid having deductibles altogether. High deductible plans can add financial stress, requiring you to pay significant out-of-pocket costs before your insurance contributes.

Key points:

  • High deductibles increase out-of-pocket expenses before insurance coverage starts.
  • Healthcare costs can vary widely by country, making high deductibles risky for expats.
  • Managing healthcare expenses in a foreign country can be complex with a high deductible plan.

Out of pocket stress

Overview: 

Out-of-pocket costs can lead to financial stress. Period. They can negatively impact your ability to access necessary healthcare services during a time you need them the most. These costs include deductibles, co-payments, and co-insurance.

Think about it, as you are getting your healthcare for whatever you require, at the end you are slapped with an unexpected bill. Not only is this going to cause stress, but it’s also going to put financial strain on your lifestyle. 

Why out of pockets are so bad:

Not only this, but even if you know that you have out of pocket costs, you may not want to visit the doctor because of this. Therefore, you may be putting strain on your health because you are not visiting or going to the hospital when required. 

Key points:

  • High out-of-pocket costs can delay or prevent access to healthcare.
  • Financial stress impacts mental and physical health.
  • Unexpected medical expenses can lead to significant financial strain.
Advice: I’ve seen this over and over again. The impact of getting high out of pocket costs during someone who is requiring serious medical attention is extremely upsetting and stressful for the person. If you’re in hospital, the last thing you want is extra costs or a big bill when you leave.
Person stressed because of out of pocket costs and financials

Preventive care vs deductibles vs out of pocket

Overview: 

Preventive care is crucial for maintaining your health. We can all agree on that right? 

I actually find with many of my customers who were with different insurances before, it’s often overlooked when their insurance plans have high deductibles or out-of-pocket costs. This oversight can lead to neglecting essential health services.

It’s better to try and catch something early, than before it’s too late. However, I understand the financial burden that comes with going to the hospitals and still having to pay every time you visit. Even if you require 1 visit per month, your deductible is $250 per visit. 

The negative impact…

When insurance plans include high deductibles and out-of-pocket costs, I’ve seen first hand that individuals will skip preventive care due to the expense coming directly from their pockets. This approach to healthcare is flawed because it discourages early detection and treatment of health issues.

Key points:

  • Preventive care is essential for early detection of health issues.
  • High deductibles and out-of-pocket costs can deter people from seeking preventive care.
  • Neglecting preventive care can lead to more serious health problems and higher costs in the long run.
Advice: People who are expats living overseas, you should consider preventative care. If it’s fully covered by your insurance (like ours) then you can go to the hospital as many times as you need being fully covered and without out of pocket costs. This is the same for prescriptions and things like this.

Mental health considerations

Overview: 

Mental health is a critical aspect of overall well-being, especially for digital nomads and expats living overseas. The unique challenges of loneliness and adapting to new cultures can impact mental health significantly.

Having access to mental health care is extremely important, especially during periods of alone time or frequently moving around on your own. Even being able to just talk to someone like a therapist or psychologist can really help from time to time.  

What does this mean for nomads?

Living abroad can be isolating, and the lack of a support network can exacerbate mental health issues. Access to mental health care is essential especially as a digital nomad or expat. Yet high deductibles and out-of-pocket costs in some insurance plans will stop some from being able to seek help.

Key points:

  • Mental health care is as important as physical health care, especially for those living away from their home country.
  • High deductibles and out-of-pocket costs can prevent expats and digital nomads from accessing mental health services.
  • Neglecting mental health can lead to more serious issues, affecting quality of life and the ability to work effectively.
peace of mind with mental health

Medical Insurance Plans Without Deductibles & Out Of Pockets

Medical insurance plans without deductibles and out-of-pocket costs ensure you don’t pay upfront for covered services. This means no unexpected expenses for you, making healthcare more accessible and stress-free. 

So, here’s a range of benefits you can get by choosing a plan that comes with no deductibles and no out of pocket costs. 

Emergency care benefits

Overview: 

Insurance plans without deductibles or out-of-pocket costs ensure you receive emergency care swiftly, without financial worry. This approach is fundamental for immediate access to necessary treatments.

Why is this important?

In emergencies, every second counts. The absence of deductibles and out-of-pocket costs means you can seek urgent care without hesitation. Our insurance plans are structured to provide this level of support and assurance.

Key points:

  • Zero deductibles and out-of-pocket costs lead to quicker healthcare access.
  • Direct payments to hospitals streamline the process, reducing stress.
  • The overall experience is enhanced, offering peace of mind and better health outcomes.
Advice: Don’t get stuck unable to pay your deductible after a serious car crash accident and the hospital cannot perform the correct surgery or help you because your insurance has not paid. This is something from a nightmare. Consider alternative, better options.

Preventative care benefits

Overview: 

Plans without deductibles or out-of-pocket costs significantly enhance access to preventative care. This approach encourages regular health checks and early detection of conditions, crucial for maintaining good health.

Why is preventative care important?

Preventative care includes services like vaccinations, screenings, and regular check-ups. These are essential for catching health issues early and preventing more serious conditions. However, the cost can deter people from utilising these services.

Key points:

  • Enhanced access to preventative care without the worry of additional costs.
  • Encourages regular health checks and early detection of health issues.
  • Contributes to long-term health benefits and reduces the need for more extensive medical treatment.
Advice: If you require a prescription for medication already, then avoid deductibles because they will charge you potentially even more than the cost of your prescription. Same applies if you require mental health, therapies and other preventive healthcare.
Examples of preventative health in medical care

Deductibles & Out Of Pockets During Health Crises

During health crises, dealing with deductibles and out-of-pocket costs can add extra worry. It’s key to understand how these costs impact your access to necessary care.

Health emergencies demand immediate and often extensive medical treatment. If your insurance plan comes with high deductibles and out-of-pocket costs, you might be faced with significant bills before your insurance starts to contribute.

Key Points

  • High deductibles mean you’ll pay more out of pocket before insurance kicks in.
  • Out-of-pocket costs can mount up swiftly during a health crisis.
  • These costs might delay access to needed care.
Advice: As we all now know, a serious global health crisis can happen at any time, leaving you extremely vulnerable especially if you are overseas in another country. This means getting the best healthcare plan for you is important.

Examples from COVID19

Overview

The COVID-19 pandemic highlighted the importance of having robust health insurance. Many faced unexpected medical expenses for testing, treatment, and hospitalisation. This was a prime example of how the people with deductibles suffered the hardest. 

The global spread of COVID-19 led to a surge in healthcare needs. From testing to intensive care for severe cases, patients required both inpatient and outpatient benefits. This puts financial strain on those without comprehensive coverage, by making them pay every time they visit the hospital. 

Key Points

  • The pandemic saw many incur high costs for COVID-19 testing and treatment.
  • Insufficient coverage led to significant out-of-pocket expenses for some.
  • The crisis underscored the value of health plans that cover a wide range of services with minimal out-of-pocket costs.
Example of COVID19 on health care patients

Travel Insurance Vs Medical Insurance

Well, in a quick summary, travel insurance is mostly for short trips. It for helping with things like cancelled flights and lost bags. It does cover some doctor visits, but you often have to pay first and then ask the insurance to pay you back. 

This means dealing with deductibles and extra costs yourself. Medical insurance is different. It’s all about keeping you healthy. You will be covered for more doctor visits and treatments directly, often without you having to pay extra. 

So, if you’re deciding between the two, think about what you really need: help for travel issues or more complete health coverage. Anyway, I’ve added more points below as a breakdown of the difference when it comes to deductibles vs out of pockets.

Out of pocket costs in travel insurance

Overview:

When comparing travel insurance vs medical insurance, it’s crucial to understand the differences, especially regarding out-of-pocket costs. Travel insurance often appears as a cost-effective solution for short-term travel needs, focusing on aspects like trip cancellations or lost luggage. However, its coverage for medical expenses can be quite limited.

What is travel insurance for?

Travel insurance is designed for temporary coverage, primarily catering to travel inconveniences rather than comprehensive healthcare needs. It typically covers major medical emergencies that occur while travelling but falls short in providing in-depth medical care, especially for out-patient services.

Key Points:

  • Travel insurance usually requires you to pay for your medical treatment upfront and then submit a claim for reimbursement. This process, known as a deductible, can be challenging, especially in urgent situations.
  • The medical component of travel insurance is often just a fraction of its overall coverage, focusing on acute emergencies. This means you might end up paying more for a broad package that doesn’t offer the depth of medical coverage you need.
  • Travel insurance typically does not include inpatient and outpatient care, which are crucial for comprehensive health coverage. This can lead to significant out-of-pocket expenses for services you assumed were covered.
Advice: Check your travel insurance policies and see if they come with high deductibles or high out of pocket costs. If this doesn’t suit you, then consider a move towards something more comprehensive or better suited for your lifestyle.
travel insurance with out of pocket costs

Deductibles in travel insurance

Overview:

Deductibles are a significant feature of many travel insurance plans, affecting how much you’ll pay out of pocket before insurance coverage starts. Now, we see this all the time. Deductibles are extremely common in travel insurance policies because they aren’t meant for healthcare. 

What does this mean for you?

A large percentage of travel insurance policies include deductibles simply because it’s designed for travel only, it’s not designed to be used as a healthcare policy to live abroad with. 

 

So, be aware or at least prepare that if you are using travel insurance as an alternative to medical insurance, you’ll likely be left out of pocket. 

Key Points:

  • Most travel insurance plans have deductibles, making it essential to understand how they work and their impact on your coverage.
  • Deductibles can significantly affect your out-of-pocket expenses in the event of a claim, influencing the overall cost-effectiveness of a policy.
  • Unlike some travel insurance plans, medical insurance policies may offer options without deductibles, providing more straightforward and comprehensive coverage.

Why medical insurance is always better

Overview:

When comparing travel insurance to medical insurance, it’s clear that medical insurance often provides more comprehensive and beneficial coverage for individuals. 

Especially those living or travelling abroad frequently. I’ve gone more into detail on my other blog about does travel insurance cover medical expenses here. 

Why is this? 

Travel insurance is designed for short-term coverage. It’s focusing on travel inconveniences like trip cancellations and lost luggage. In contrast, medical insurance offers extensive coverage for health-related issues, including long-term and serious conditions.

Key Points:

  • Medical insurance covers a wide range of health issues, from emergency services to long-term conditions like cancer, which travel insurance typically does not cover.
  • Medical insurance often includes benefits like direct payments to hospitals and 24/7 support, making it more convenient and reliable in emergencies.
  • Despite perceptions, medical insurance can be more affordable in the long run, offering more perks and comprehensive coverage compared to the limited medical coverage of travel insurance.
Advice: For those frequently living or travelling abroad, investing in medical insurance is a strategic choice. It ensures continuity of care and safeguards not just your health but also your financial security.
medical insurance is better than travel insurance

Conclusion

In conclusion, understanding the difference between deductibles and out-of-pocket costs is crucial for anyone navigating the healthcare insurance landscape.

From my decade of experience, I’ve seen how high deductibles can initially seem appealing due to lower premiums but can lead to significant out-of-pocket expenses when you need care.

This can be particularly challenging for nomads and international entrepreneurs who might face unexpected healthcare needs in different countries.

My advice is to carefully evaluate your healthcare needs and financial situation before choosing a plan. Consider plans with lower deductibles and out-of-pocket maximums to avoid being caught off guard by high medical bills. 

Remember, the goal is to ensure that your insurance provides the support you need without leading to financial strain.

Stay informed, seek advice, and always consider your unique lifestyle and health needs when choosing medical insurance. Your health is your most valuable asset, and choosing the right insurance coverage is a critical step in protecting it.

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Damon

With a decade of experience in medical insurance, Damon crafts solutions for nomads and global entrepreneurs. Often seen at global seminars or featured in industry publications, he’s dedicated to simplifying medical insurance for all.

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