What's the Difference Between a Deductible and a 'Medical' Deductible?

Sunday afternoon was flying by when I received an email from Jon Brooks, a colleague who is currently shopping for health insurance for himself and his family on Covered California.

"Do you have any idea," he wrote, "what the difference is between a 'deductible' and a 'medical deductible'? Plan I'm looking at has 'deductible' of $0 and 'medical deductible' of $4,000 for family."

Huh?

Then today, a freelance reporter, also working on her application, asked me the same thing. As you can see in the screenshot above, she was comparing three plans. For two of the plans, the deductible was $5,000, but for the third plan, the deductible was "not applicable." Further down, the medical deductible for two plans was "not applicable" but for the third plan was $2,000.

We were both confused.

At first James Scullary, a spokesman at Covered California, was confused, too. But he called me back with the answer. It turns out that "deductible" might mean more than one thing.

On Covered California, if your plan has a "deductible," that number is the amount that you must pay out of pocket before your insurance will begin to pay. Money you spend on both medical services (like doctor visits) and prescription drugs are counted toward the deductible.

But if your plan has a "medical deductible," that refers to "most medical services," but does not include prescription drugs. Plans with medical deductibles have a second deductible just for prescription drugs. In the shot above, you can see that the plan in the third column has a $2,000 medical deductible and a $250 "brand drug" deductible. The plan has "not applicable" under plain old "deductible" because the plan does not have a plain old deductible. It has a medical deductible combined with a drug deductible for (I'm doing the math here) a total deductible of $2,250.

So, when you're shopping for health insurance, pay attention to whether your plan has a "deductible" or a "medical deductible" + "drug deductible."

One of the promises of the ACA is that consumers will be able to make an "apples-to-apples" comparison. But Scullary agreed this deductible-vs-medical-deductible was confusing. "It's not apples-to-apples," he said, adding that it's an issue that has been raised internally and that Covered California is "looking to simplify, so we don't have the confusion."

I pointed out that a reasonable person might equate "not applicable" with "zero." Scullary agreed that "not applicable" was "not as clear as it could be."

One thing that could simplify the confusion is better definitions. If you mouse over the terms, a dialogue box pops up with the definition. Check out the photo of the 'medical deductible' definition. It's similar to, yet different from, the definition for "deductible" above.

Note that children's dental benefits are not included under Covered California health plans, because consumers must buy a separate policy for children's dental. The fact that the words appear here in this definition suggests that children's dental benefits are somehow covered.

I called Brooks to fill him in. He said he had been confused and he wanted an answer "because it was going to factor into my decision as to which plan I picked."

But he somehow knew that equating "not applicable" with "zero" was too good to be true, when he was also seeing "$4,000" elsewhere.

"I used the logic that whatever is worse for me is probably true," he said.

This post has been updated with more detail about medical deductibles.