On Tuesday, I reviewed the different types of health insurance plans offered in the marketplace. However, you need to pay particular attention to four important expenses when determining what plan best meets your needs.
Your Deductible
Your deductible consists of the costs you have to pay before your plan begins helping out with covered services. It’s usually a fixed dollar amount and varies based on individuals, families and whether you receive care from an in-network or out-of-network provider.
For example, your plan could have $1000 deductible for individuals who get care in the provider’s network and $2000 for out-of-network services. In addition, the deductible for a family could be something like $3,000 and $6,000 for in-network and out-of-network care respectively.
Whichever limit applies, you’ll pay 100 percent of your medical and pharmacy bills until you reach the limit (with in-network preventive care and prescriptions copay usually exclude from that rule). Once you do hit your deductible, the insurance company will contribute to some of your health care costs through coinsurance and copay.
Usually, a health insurance plan with a high deductible has a lower premium, while plans with lower deductibles will have higher premiums.
Your Copay
Like a deductible, your copay is a fixed amount that you pay for your health care. However, you incur this expense when you receive a service or fill a prescription and have met your deductible. The amount of your copay fluctuates depending on the service or type of prescription.
For example, a doctor’s office visit might have a copay of $20 per visit, while an urgent care facility would be $75 and an emergency room $400. Despite the different amounts, the copay costs will always be a fixed figure. Typically, a health insurance plan with higher copays will have a lower premium, while plans with lower copay rates will cost you a bit more. Next, we have your coinsurance. Like your copay, coinsurance is your share of the costs of a health care service. But instead of a fixed-amount per service or prescription, you have to pay a percentage of a total charge for the service. You start paying coinsurance after you’ve paid your plan’s deductible. You may also incur a service that has both coinsurance and a copay. With coinsurance, the amount you are responsible for is expressed as fraction – 70/30, 80/20 or 90/10. For an 80/20 plan, the insurance company pays for 80% of costs incurred, while you pay 20%. A health insurance plan with a high percentage participation rate – such as 70/30 – will have a lower premium, while plans with lower percentages will have higher premiums. Last but certainly not least, you need to pay attention to your total out-of-pocket limit. As the name suggests, the out-of-pocket limit is the most you pay during a coverage period (usually a year) for your share of covered costs. In other words, this provision limits the total amount you have to shell out in case of a catastrophic event like a terminal illness or car accident. This limit includes deductibles, coinsurance, copayments, and any other expenditure that is a qualified medical expense. Be careful though: this limit does not count premiums, balance billing amounts (i.e., billing from individual service providers) for non-network providers and other out-of-network cost-sharing, or spending for non-essential health benefits.
As with the other expenses, out-of-pocket limits can vary. A typical limit would be $2000-$3000 for an individual and $4000-$6000 for a family. The limits increase if you receive care out of network. After you reach your limit, the insurance company picks of the rest of the tab for any charges incurred during the remainder of the coverage period. When you select a plan, make sure compare and contrast each plan’s deductible, copay, coinsurance, and out-of-pocket limit to figure out which one better suits your needs. For instance, if you don’t use your insurance often, you may choose a plan with a high deductible to take advantage of lower monthly premiums and an HSA. On the other hand, if you go to the doctor often or fill a lot of prescriptions, you may choose a plan with low copays but may have higher premiums. Choosing the best plan takes into account how each of these costs affect your bottom line.Your Coinsurance
Out-of-Pocket Limit
Compare these Costs to Choose the Best Plan for You