Many people find themselves intimidated when it's time to sign up for new health insurance. Often that's because they don't understand the terms related to payment, such as copay, deductible and coinsurance, and how they work together. To some extent, we feel that we really can't know how much our insurance will pay until we sign up for it and incur charges. If we regret our choices, it's most likely too late to change until the next sign-up period. Here's a rundown of common terms and how they work together.
A copay is a fixed amount that you will pay out-of-pocket, whether or not you have met your deductible. The copay may vary by the type of service. A typical copay might be $20, paid to the health care provider when you visit. Most medical offices post signs at the check-in point that state payment is expected at the time of service.
A deductible for healthcare is the fixed amount that you will pay out of pocket for healthcare services before your insurance starts to pay. So let's say your deductible is $1,500. Your plan will not pay anything until you have paid the first $1,500 for covered health care services. But the deductible may not apply to all services. Unlike some other types of insurance (such as auto or home) many health insurance plans provide some benefits before the deductible is met. For example, if you visit your doctor for an annual preventive care appointment it may be fully covered.
A low deductible sounds good, but it typically results in much higher premiums. Conversely, a high deductible typically means lower premiums. For routine office visits having a high-deductible isn't likely to be a big problem since the fees for these services are lower and more predictable. But for expensive procedures, patients may be unaware of how much they'll be expected to pay. To avoid surprise and assure payment, physicians bear the burden of alerting patients to the likelihood of higher bills.
Coinsurance is a shared cost, between you and your insurance company, after you've met your deductible. It is a percentage of the cost of a covered health care service. Let's say your coinsurance is 20%. If an office visit to your doctor is $100 and you have already met your deductible, you would still pay 20% of the cost, or in this case, $20. Your health plan pays the rest.
Generally, you'll find coinsurance rates listed this way: 90/10, 80/20 or 70/30. So let's say your policy is 90/10. That means that your insurer will pay 90% of the cost and you will pay 10%. In that case, an office visit that costs $100 (and as before, you have already met your deductible), with a 90/10 coinsurance rate, your plan would pay $90 and you would pay the remaining $10.
Coinsurance often comes with a "coinsurance cap," such as $2,000 or $3,000. Once that amount is reached, the insurer is responsible for 100% of any charges.
Whether you're signing up for new insurance or trying to determine what your existing policy covers, you should be able to speak to a representative of the provider to have specific questions answered. If the policy is through your employer, ask your HR office to delve into details with you.
Presumably having a high-deductible health plan (HDHP) causes us to shop around for lower cost medical care, though not everyone with an HDHP does. HDHPs may cover some preventive care benefits at low or no cost. For example, annual physicals, immunizations and weight-loss programs all encourage better health, therefore it's in the best interest of the health plan to pay for all or most of these services. Even so, if you're not sure what is covered, it's best to contact your insurer before your visit.
HDHPs are often paired with Health Savings Accounts (HSAs) that allow you to set aside money tax-free to pay your medical expenses. HSAs can be funded by the employee, the employer or both. Contributions by the employer are tax-free to the employee and tax-deductible to the employer. HSA withdrawals for qualified medical expense are tax-free to the account owner.
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