Why Does My Health Insurance Deductible Have 2 Numbers?

When reviewing your health insurance policy details, you may notice your annual deductible has two separate dollar amounts listed – an “in-network” deductible and a higher “out-of-network” deductible amount.

For example:

• In-network deductible: $1,000
• Out-of-network deductible: $2,000

This often leaves people wondering – why are there two different deductible amounts on my health plan?

Below we’ll explain what these dual deductibles mean, how they work, and why insurance companies structure policies this way.

What is a Health Insurance Deductible?

First, let’s briefly recap what a deductible is.

The annual deductible is the amount you must pay out-of-pocket for covered health services before your insurance begins contributing towards claims.

For example, if your deductible is $1,000, you pay 100% of costs until your total spending hits $1,000. At that point, insurance kicks in to cover a portion of additional costs for the remainder of the year.

Deductibles reset to zero at the start of each new plan year.

Why Are There In-Network and Out-of-Network Deductibles?

Health insurance companies negotiate set rates with certain doctors, hospitals, and healthcare facilities in an area to be part of their “provider network.”

These in-network providers agree to accept the negotiated rates as payment in full for treating patients covered by that insurance company.

Out-of-network providers do not have such contracted rates in place. They can set their own pricing for services.

The dual deductibles incentivize policyholders to use in-network providers whenever possible. Here’s how it works:

Lower in-network deductible

Using an in-network doctor or hospital means you only have to pay up to the lower in-network deductible amount before coverage kicks in.

For example, if your in-network deductible is $1,000, once you hit $1,000 of spending, your insurance contributes toward additional in-network care for the remainder of the year.

Higher out-of-network deductible

Seeing an out-of-network provider means you pay up to the higher out-of-network deductible amount before the insurance company contributes any coverage.

For instance, if your out-of-network deductible is $2,000, you would pay the first $2,000 of out-of-network care yourself before the insurance company pays any portion of additional costs.

Having a higher out-of-network deductible is meant to deter policyholders from using non-contracted providers.

How Much Higher Is the Out-of-Network Deductible?

Insurance companies typically set the out-of-network deductible anywhere from 1.5 to 2 times higher than the in-network amount.

For example:

• In-network deductible: $1,000
• Out-of-network deductible: $1,500 to $2,000

However, some plans have out-of-network deductibles that are even 3 or 4 times the in-network amount.

There is no standard ratio insurers must follow – they set the out-of-network deductible based on their own criteria and projections.

Sample Scenario: Using In-Network vs. Out-of-Network Providers

Here is an example to illustrate how the dual deductibles work when using network vs. non-network providers:

• Your health plan has a $1,000 in-network deductible and $2,000 out-of-network deductible.
• You break your leg and go to an in-network hospital. The total bill is $5,000.
• You pay the first $1,000 to cover the in-network deductible.
• Your insurance pays a negotiated rate of 60% for the remaining $4,000 balance ($2,400).
• Your total out-of-pocket cost is $1,000.

Now let’s say you went to an out-of-network hospital instead:

• The hospital bills $7,000 for the same treatment.
• You pay the first $2,000 to cover the out-of-network deductible.
• Your insurance pays just 50% of the remaining $5,000 balance ($2,500).
• You also have to pay the portion exceeding the insurer’s allowed amount – an extra $1,500.
• Your total out-of-pocket cost is $3,500.

Using the out-of-network hospital cost an extra $2,500! This shows how staying in-network saves you money when getting care.

Why Insurance Companies Use Dual Deductibles

Imposing higher out-of-network deductibles allows insurance companies to:

• Get policyholders to use in-network providers as much as possible
• Avoid overpaying for services from non-contracted providers
• Incentivize providers to join their network by steering patients there

Staying in-network helps insurance companies contain costs once the deductible is reached and they start covering claims.

Plans with wider networks and more in-network options can maintain lower deductibles overall for their members.

Additional Out-of-Network Costs Beyond the Deductible

It’s not just the deductible that is higher out-of-network. Health plans also impose other out-of-network costs:

• Higher coinsurance – The percent you pay for covered services is typically higher when seeing non-network providers. For example, you may pay 40% coinsurance out-of-network versus just 20% in-network.

• No out-of-network coverage maximum – Plans often cap what you’ll pay out-of-pocket for in-network care. But there may be no limit to what you’ll owe for out-of-network services.

• Balance billing – Out-of-network providers may bill you for the difference between their charge and what your insurance covers. There are no balance bills from in-network providers.

• No negotiated rates – In-network providers have contracted rates in place with your insurer. Out-of-network providers can charge their full rates.

These factors stack up to make out-of-network care extremely expensive compared to staying in-network. The higher out-of-network deductible is just one piece of the puzzle.

Strategies to Keep Your Costs Down

To keep your health insurance costs as low as possible:

• Use in-network providers exclusively – Staying in-network means you only have to pay up to the lower deductible and other cost-sharing amounts.

• Avoid out-of-network care – Seek in-network alternatives to providers listing as out-of-network whenever feasible. The savings are substantial.

• Verify network status – Always check that a doctor or hospital is in your plan’s network before receiving care to avoid surprise bills.

• Get referrals – Ask for referrals to specialists that are in-network with your health plan provider to prevent coverage gaps.

• Look for reciprocity – Some plans have reciprocity with other insurers’ networks that can help alleviate out-of-network charges.

• Negotiate bills – If you do end up with out-of-network charges, negotiate with the provider to reduce costs.

Leveraging in-network providers is the #1 way to maximize your insurance coverage and minimize expenses.

The Bottom Line

While frustrating, the dual deductibles serve to contain insurer costs and steer members towards the contracted network rates. Understanding how the in-network and out-of-network deductibles work allows you to use this system to your advantage by staying in-network whenever possible.

Frequently Asked Questions

What if I have no choice but to see an out-of-network provider?

In cases where no in-network provider is available for needed care, speak to your insurer about exceptions to the out-of-network charges. They may be willing to negotiate a payment compromise with the provider.

Does the deductible apply to all services?

Some plans have a separate, lower deductible that applies to just prescription drugs or certain services like mental health care. Check your policy details.

Can I meet both deductibles in a year?

Yes, your qualifying out-of-pocket spending for both in-network and out-of-network care can count towards the respective deductibles in a single year.

Is the deductible the only out-of-pocket cost?

No, you also pay copays or coinsurance for covered services depending on the plan design. Copays don’t apply to the deductible amount.

What if the out-of-network doctor is cheaper?

The insurance company will still only cover their allowable charge for that service regardless of the provider’s lower fee. You pay the deductible plus any balance above the allowance.