High Deductible Health Plan Deductible and Out-of-Pocket

Course: Income Tax Planning
Lesson 7: Arriving at Adjusted Gross Income

Student Question:

Regarding the minimum deductible and maximum out-of-pocket limits for a high deductible health plan, could you explain more clearly “The minimum deductible must be at least $1,400 (single) or $2,800 (family)“. Does that mean, if single, an individual will pay at least $1,400 per doctor visit/procedure, but no more than the maximum out-of-pocket expense of $6,900 (single) per year?

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Instructor Response:

Hi Michael,

An annual deductible is that point at which benefits under the policy will be payable.  For example, a single individual has an emergency room visit that costs $50,000 on January 1, 2020. Assume the policy is an 80% reimbursement rate policy with a deductible of $1,400 and an annual out-of-pocket limit of $6,900:

Here’s what the individual pays:

$ 1,400   Annual deductible

$ 5,500   20% of the remaining cost up to the annual out-of-pocket expense limit

$ 6,900   Total cost paid by the individual.

The insurance company pays $43,100.

If the individual needs further medical care, all reasonable and necessary costs are paid by the insurance company at 100% with the possible exception of doctor’s office co-pays.

Let me know if you have any other questions on this.

Bruce