Are you one of the millions of Americans who are thinking about getting their medical insurance this year?
Finder found out that most Americans wrote down something about their health for their New Year’s Resolution list.
Since Statistica reports that half of the US population is covered by a private health insurance provider, my suggestion is to sign up for one if you and your family have not been covered by one.
There are 900 million companies to choose from in the current market. If you got your first health insurance yourself, you would have to understand three keywords.
In this article, I will discuss what a deductible, copays, and coinsurance are in terms of health insurance.
Before that, do take a look at this short video on how you should choose a health insurance plan:
Medical insurance deductible
I am going to talk about medical insurance deductible and share a few examples of how it works!.
How it works
When you encounter the word “deductible” while looking over a medical insurance plan, it refers to a yearly fee that you have to pay for it.
The goal of having a deductible is for insurance companies to include a cost-sharing plan with each of their customers. You would have to pay this as an agreement that in exchange for covering any medical procedure you need within the year.
This amount is estimated to be between $500 to $1,500 if the policy will only cover one person. For a policy that covers a family, the costs may fall in between $1,000 to $3,000.
A high-deductible health plan (HDHP) also exists. It is a health plan that has a deductible that starts at $1,400 for individuals and $2,800 for families. In exchange, you would be offered lower monthly premiums and qualify for a health savings account (HSA).
When choosing an individual health insurance plan, you will have to pick the deductible you can shoulder. For families, you need to include a deductible for each relative in the plan and a family deductible that applied to everyone.
Aside from that, you should choose the right plan depending on your health condition and overall budget. Choose a policy with a higher deductible and a lower premium if you are healthy. However, if you have a medical condition, opt for a lower deductible and a higher premium.
Every year, the cost resets to zero. Aside from that, certain preventive services and benefits are not counted towards this as your insurance policy may cover this in full. What does count is any expense related to prescription drugs, but do take note if you need to pay a fee on top of it.
There are two ways where your policy will ask you for this deductible: a premium and an out-of-pocket maximum.
Relevant: Also read what is an insurance premium and insurance deductible here
Medical insurance premiums
If you encounter a policy that asks you for a premium, the insurance provider is to ask you to pay for your coverage per month instead of an annual fee.
Opting for a plan that has a higher premium means that you would only have to pay a lower amount towards your health insurance deductible in the process.
Do take note that forgetting to pay this cost will lose your health coverage in the process. If you got your health plan through your employer, they would shoulder part of the premium, and the rest is deducted on your salary.
Remember that choosing a health plan that suits you or your family is based on your current health condition and the expected health treatments you would have to get within a year.
Medical insurance out-of-pocket maximum
Meanwhile, encountering this term in your policy means it is the maximum amount that you would have to shoulder.
This limit depends solely on the mandate of your local government. After they decide on the amount, all the insurance companies in their jurisdiction should follow. This amount resets every year too.
The maximum that you can get in any 2020 plans is $8,200 for individual plans and $16,400 for family plans. Depending on the plan you get, you can get a lower maximum.
Three items count towards your out-of-pocket maximum under your insurance:
- Annual deductible
- Copayment
- Coinsurance
Aside from that, these are items that do not count as out-of-pocket:
- Monthly premium
- Services that are not covered under your plan
- Copay
Examples
For this term, let us look at three different examples where you would have to use these three terms in context.
When being asked for your deductible
Let us say you are working as a store manager at a local supermarket. You take daily jogs, eat a balanced diet, and have annual check-ups with your doctor.
If you are looking for a new health insurance plan based on the tip I mentioned earlier, you will opt for an insurance plan with a higher deductible.
Meanwhile, if you want to purchase a plan that includes your parents, and you know that both of you inherited diabetes, you would look for an insurance plan that has a lower deductible.
Aside from that, you would have to watch out for a family deductible. Apart from that, you should think about the cost you would have to pay for you, your mom, and dad too.
When being asked for your premium
Let us say you have a sister, Letty, who is an occasional drinker and smoker. If you were to get a health insurance plan for her, you could ask your employer to add her as a dependent.
When you ask your employer about this, check the benefits before signing your sibling under the program. You should take note of essential benefits such as annual medical exams and dental visits too.
When being asked for your out-of-pocket maximum
Remembering the example with Letty, do remember that she drinks and smokes. Therefore, this may increase her chance of a sudden trip to the hospital within the year.
With that in mind, this means that your sibling is possibly getting her own health in danger. You should choose the smallest out-of-pocket costs as much as possible. Doing this will help you gain a larger chunk paid by your sister’s health insurer.
On the other hand, let’s say if you wanted to get a plan for yourself. With that in mind, if you maintain a clean bill of health, you can opt to make your out-of-pocket costs large enough to fit in your budget.
Doing this will help you prepare for a sudden medical emergency and adjust your insurance plan for the next year to make up for it.
Medical insurance copays
After paying for your deductible, your insurance provider would ask you for a copay. Let us find out what this means in this section.
How it works
Simply put, a medical insurance copay is a fixed fee you would have to shoulder for a specific medical service or medication. This is separate from the total bill of the medical service.
The expected amount you would have to pay for this is until $30. This does not change even if you went with a different doctor.
Aside from that, this is included in your out-of-pocket costs in your insurance plan too.
Example
In this section, I will discuss two situations where you would have to pay for this amount. Do take note that these are probable situations that you can fall under when making use of this.
Exceeding your medical insurance’s deductible
For example, you wanted to start training to become a professional car racer. Knowing that you might have to worry about car crashes, it would mean that your deductible will be used up once it happens.
With this in mind, you should ask your medical insurance provider and local hospitals on how much they should charge for physical rehabilitation. Then, ask if they have a copay option to get you a peace of mind even if your future physician is outside their network.
Seeing another physician not covered by your provider
Using the previous example, let us say you did get the medical plan, and you did get into an accident later this year. You then find out that the doctor who helped you is not covered under your medical policy.
With that in mind, you call your health insurance provider and ask how much you would have to pay. They tell you that you would have to pay $50 for the initial consultation and $20 for each physical therapy session.
You would then know that you would have to pay for both of them, and you can even negotiate with your health provider to have the rest of the payment covered.
Medical insurance coinsurance
The last keyword I will cover in this article is coinsurance. This also has something to do with paying for what your insurance policy will cover.
How it works
Aside from paying a deductible as part of your cost-sharing plan with your medical insurance provider, they also added a coinsurance clause in their policy.
In exchange for your provider to pay for your medical bill, you would have to pay a portion of the bill. It will depend on what kind of medical treatment is outlined in your policy.
You only need to pay for this part only if you have paid your deductible in full. Aside from that, this cost will count towards your out-of-pocket maximum too.
There are four tiers you can get with your policy:
- Bronze – You pay 40% of the bill, and your insurer pays the remaining 60%.
- Silver – 70% is shouldered by your insurer while the remaining 30% comes out of your pocket.
- Gold – Your medical bill is split into 80/20, where you would pay the 20%, and the insurer pays for 80%.
- Platinum – Your medical insurance provider pays for 90% of the bill, and you pay the remaining 10%.
Example
Let’s say you are a middle-aged man who likes steak and works at a construction factory. Now, due to your high-protein diet, you tend to go to the hospital often to get checked for heart disease and take medications. You also have a medical policy with a Silver tier.
Then, you were rushed to the hospital because you felt a stroke while you were having a meeting one day. Once you were settled in, you remembered that you spent your deductible in your plan, which is $4,000, before you came in.
Now, the hospital charges you $4,000 for your stay there. Now, since you already spent your deductible, you have to ask your insurance provider to cover your visit. Since you have a Silver-tier policy, you need to pay $1,200 so that they can cover the remaining $2,800.
Conclusion
In this article, we learned more about medical insurance when it comes to three things.
First, you learned that your future medical insurance plan has a yearly limit to how much you would have to pay before your insurer pays for the rest. This involves premiums and out-of-pocket maximums.
Second, if you were to get any type of medical treatment covered in your policy, you would need to pay a fee, whether it is for an operation or a check-up. This is known as the co-pay.
The final thing is the share of the total cost you would have to pay, which is known as the coinsurance.
Did this help you get a sense of health insurance? Read these articles to help you choose the right plan and manage your money at the same time:
