How do deductibles function in health insurance plans?

Deductibles play a crucial role in health insurance plans by representing the out-of-pocket amount that policyholders must pay for healthcare services before their insurance coverage kicks in. When an individual incurs medical expenses, they must first reach their deductible limit. For example, if a health insurance plan has a deductible of $1,000, the insured must pay this amount for covered services before the insurance starts to pay for additional costs.

This structure encourages responsible use of healthcare services, as individuals are motivated to consider the costs associated with their care before reaching their deductible. Once the deductible is met, the insurance will typically start covering a larger portion of the medical expenses, although the insured may still be responsible for certain copayments or coinsurance.

Other options describe different aspects of how health insurance works but do not accurately capture the purpose of a deductible. For instance, deductibles are not payments made after insurance coverage is provided, nor are they fixed amounts for specific services—they represent a cumulative amount across all covered services. Lastly, while there may be limits on annual medical coverage in some plans, they are distinct from how deductibles operate.