Can't Pay Your Health Insurance Deductible? What Now?

You’re not alone if you can’t afford your health insurance deductible. No matter how much your deductible is, if you don’t have that much in savings and you’re living paycheck to paycheck, it can feel like your deductible is too high.

This article will explain some strategies and options for coping with medical costs when you can't afford your deductible.

Health insurance deductibles have been steadily rising for years. Depending on the plan design, the deductible can be as high as the allowable out-of-pocket maximum, which is $9,450 for a single individual in 2024.

The cap on out-of-pocket costs will decline—for the first time—in 2025, when it will be $9,200 for a single person. But that's still a lot of money. Fortunately, most health plans have deductibles well below the maximum limit on out-of-pocket costs.

The vast majority of employer-sponsored health plans require members to pay a deductible. Among these workers' plans, the average individual deductible was $1,735 in 2023. Although this is far less than the maximum allowable out-of-pocket cap, it is still dramatically higher than the average annual deductible in 2006, which was just $584. 

Among people who buy their own health insurance in the individual/family market, deductibles are even higher. eHealthinsurance, an online brokerage, reported that for 2021 coverage selected by consumers who used eHealthinsurance and didn't qualify for any ACA subsidies, the average individual deductible was $4,490.

It's important to note that people who don't receive ACA premium subsidies are more likely to buy lower-cost bronze plans, which have higher deductibles.

And the ACA's cost-sharing subsidies—obtained by nearly half of the people who enrolled in Marketplace/exchange plans during the open enrollment period for 2024 coverage—provide significantly lower deductibles for people whose income makes them eligible for these subsidies.

(Note that cost-sharing subsidies are only available on silver plans; a single person in the continental U.S. with an income as high as $36,450 will qualify for cost-sharing subsidies in 2024, but would need to select a silver plan through the health insurance Marketplace/exchange in their state to take advantage of this benefit.)

But there is no doubt that people who buy their own health insurance are often subject to fairly significant deductibles.

There has been a trend toward more $0-deductible plans in the individual market (in addition to $0-deductible plans that result from cost-sharing subsidies), but these plans still tend to have fairly high total out-of-pocket costs and can have substantial "copays" for inpatient care.

So it's important to look at all of the plan details when selecting coverage, as opposed to just the premium and the deductible.

Take Advantage of Open Enrollment

For most types of health insurance, there's an annual open enrollment period when you might have an opportunity to switch to a different policy.

• For individual/family health coverage (through the Marketplace off off-exchange), the enrollment period is November 1 to January 15 in most states.
• For employer-sponsored health insurance, the employer sets their own open enrollment period. It's often in the fall (if the plan follows the calendar year), but it can be anytime of year. Not all employers offer multiple health plans. But if yours does, the annual open enrollment period will be your chance to pick a different plan.
• For Medicare, it's October 15 to December 7. This applies to Medicare Advantage and Medicare Part D.

Utilizing the annual open enrollment period could give you an opportunity to select a plan with a more affordable deductible, as long as you can afford the monthly premiums.

Planning Ahead With a Health Savings Account or Flexible Spending Account

If you enroll in an HSA-qualified high-deductible health plan (HDHP), try to make it a priority to establish an HSA and contribute to it on a regular basis, so that the money will be there if you need to meet your deductible.

If you have an HSA-qualified health plan, the maximum allowable HSA contribution in 2024 is $4,150 for a single individual, and $8,300 if your HSA-qualified health plan also covers at least one other family member. For 2025, these limits increase to $4,300 and $8,550, respectively. HSA contributions can come from you or your employer (or anyone else, on your behalf) but the combined total cannot exceed the allowable contribution limits.

If your employer offers a flexible spending account (FSA), you can consider making contributions to the FSA so that the funds will be there when you need to meet your deductible. The maximum allowable contribution to a medical FSA is $3,200 in 2024.

But this is not a sure-fire strategy, because FSAs have a "use it or lose it" rule, and the money in the account belongs to your employer if you leave your job (as opposed to an HSA, where the money rolls over from one year to the next if you don't use it, and goes with you if you leave your job).

One additional note: Employers can set FSA contribution caps that are lower than the maximum allowed by the IRS, so check with your employer to see how much you can contribute to an FSA if your employer offers one. Employers cannot, however, set lower contribution caps for HSAs; if your employer offers an HSA, they must allow you to contribute up to the maximum limit set by the IRS.

When You Can't Afford Your Deductible

If you can’t afford your deductible, your options for dealing with it depend on whether you owe your deductible right now, or whether you’re preparing in advance.

If you have to pay your deductible right now but you don’t have the money, your predicament is tougher. If you don’t come up with a way to pay, your care may be delayed or you might not be able to get the care you need.

Emergency departments cannot turn people away based on a lack of ability to pay, but this rule only requires assessment and stabilization, and does not apply to non-emergency care.

Here are some possible options to keep in mind.

Negotiate a Payment Plan

Your healthcare provider can’t waive or discount your deductible because that would violate the rules of your health plan. But they may be willing to allow you to pay the deductible you owe over time.

Be honest and explain your situation upfront to your healthcare provider or hospital billing department. Explain that you’re not trying to get out of paying but that you’d like the privilege of setting up a payment plan.

The Caveats

You may owe your deductible to more than one healthcare provider. For example, if you see a healthcare provider and they order blood tests, you’d owe part of your deductible to your healthcare provider and part of it to the blood test lab. This means negotiating two payment plans, not one.

If you don’t keep up the payments on your negotiated payment plan, you’ll seriously damage your relationship with your healthcare provider, and you might not get another opportunity to set up a payment plan for future medical bills. So you'll want to make sure that the payments and repayment timeframe are realistic, given your financial situation.

Explore Cheaper Health Care Options

There’s usually more than one way to treat a given healthcare problem. Are you using the least expensive treatment option that will work for you?

While switching to a less expensive treatment option won’t make your deductible any smaller, the deductible will come due over a longer period of time and in smaller chunks.

For example, if you have a $3,000 deductible and are getting a treatment costing $700 per month, switching to a treatment costing $400 per month will lower your monthly expenses.

You’ll still end up paying the entire $3,000 deductible before your health insurance begins to pay. But with the cheaper treatment, you’ll spread that deductible over eight months rather than five months, making it easier to manage.

Can you get the care at a free clinic or a community health center that will care for you regardless of your ability to pay? Some of these places will care for you for free, will charge you based on your income, or will accept what your health insurance pays as payment in full. Check to see if there is a community health center near you.

Take an Early Distribution or a Loan From Your Retirement Account

By choosing to take money from your retirement to pay your health insurance deductible, you’re borrowing from your future to pay for your present. This isn’t a very good long-term plan. But, if you’re facing a situation where you may not have a future if you can’t pay your health insurance deductible, then you might consider this an option.

If you take a distribution from your traditional IRA or 401(k) before you’re age 59 1/2, you’ll owe income taxes on that money as well as a penalty tax.

You may qualify for a hardship distribution from your IRA or 401(k), depending on the circumstances, but you'll generally still owe income taxes plus an extra 10% tax on these early distributions.

Two other options may help you avoid the early distribution penalty:

• You may withdraw the money you contributed to a Roth IRA or Roth 401(k) without a penalty. This doesn’t apply to the earnings and investment gains in the Roth IRA, but only to the funds you contributed. (This is because Roth accounts are funded with after-tax money, so you already paid taxes on the money you contributed).
• Some 401K plans will allow you to take a loan of up to $50,000 or half the amount in your 401K, whichever is smaller. Commonly, the loan is paid back over five years with money automatically subtracted from your paycheck. You’ll pay interest on the loan, but you’re paying that interest to yourself—the interest goes into your 401(k). If you lose your job before the loan is paid back, you have to come up with the remaining balance or it’s considered an early distribution and you’ll pay both income taxes and a penalty on it.

Sell Your Stuff

Nobody wants to sell their stuff to pay for something as mundane as a health insurance deductible; but, desperate times call for desperate measures. If you can't get your next round of chemotherapy because you can’t pay your health insurance deductible, then it’s time to think about how to raise the funds.

Start by considering selling off valuable but unnecessary things like your jewelry, bicycle, surfboard, iPod, or motor scooter. Move up to selling other valuables like your car or wedding ring only if you’re really desperate. You're likely to get a better price for things if you sell them yourself on a platform like Craigslist or eBay than if you take them to a pawn shop or consignment store, but selling them yourself takes more effort.

Charge It

Using a credit card, personal loan, or home equity line of credit to pay your health insurance deductible is a dicey proposition.

It amounts to mortgaging your future and getting deeper into debt just to meet your basic expenses. If you can’t pay your deductible now, how will you pay next year’s deductible while you’re also paying off your debt from this year’s deductible?

On the other hand, if you need medical treatment to save your life, prevent permanent disability, or keep you healthy enough to keep your job, using credit is a better approach than foregoing the medical care you need.

Credit doesn’t have to mean a credit card. It can also mean borrowing from the equity in your home, a friend or family member, or taking a personal loan from a bank or credit union.

Access a Workplace Financial Hardship Charity

Many large employers have an employee-assistance charity program. Funded by small donations made by individual employees, these donations are subtracted from donors’ pay in equal amounts over the year.

Employees facing a one-time financial hardship may apply to the charity for financial assistance. These charities don’t usually require you to be a donor in order to get help, but rules about how much financial assistance will be provided, who qualifies, and how the money is disbursed vary from program to program. Your human resources or employee benefits department is likely your best source of information. 

Summary

Health insurance deductibles can be several thousand dollars, depending on the plan. For non-emergency care, a patient may not be able to receive the care they need if they don't have a way to pay the deductible, particularly if they need ongoing care. But there are various options, including payment plans, tapping into an FSA or HSA, loans or distributions from a retirement account, and seeking lower-cost health care services.

If the medical need is likely to be ongoing, you may want to consider a different health plan (if available) during the next annual open enrollment period, so that you can have a more manageable deductible in the future. You'll also want to consider HSA or FSA options that might be available to you so that you can plan for future medical costs.