In health insurance, what does the term "deductible" refer to?

The term "deductible" in health insurance refers to the upfront amount a consumer must pay out of pocket for healthcare services before their insurance plan begins to pay for covered benefits. This means that insured individuals are responsible for covering their own expenses up to a specified level before the insurance provider starts to contribute.

For example, if a health plan has a deductible of $1,000, the insured person must pay the first $1,000 of medical expenses during the policy year. After this threshold is reached, the insurance company will typically cover a larger portion of the healthcare costs according to the terms of the policy. This structure is designed to encourage consumers to be more mindful of their healthcare spending.

The other options describe different aspects of health insurance, but do not accurately define what a deductible is. The total amount paid for premiums refers to the regular payments made to maintain insurance coverage rather than the cost-sharing element of deductibles. The annual limit on out-of-pocket expenses relates to the maximum amount a consumer would pay in a year, which includes deductibles, copayments, and coinsurance, while the amount covered by the insurance plan pertains to what the insurance pays for health services after the deductible has been met.