Health insurance jargon like “co-payments” tend to overwhelm and confuse us when we hear them.
Did you ever look at a health insurance quote and think, “I have no idea what all of this means, but I guess it looks okay?”
For most people, reading through the terminology on an insurance quote is a good cure for insomnia. The words seem familiar, but you haven’t taken the time to think about what they really mean. Or maybe it looks like hieroglyphics designed to confuse you. These are terms I deal with every day, so I will break them down for you:
What is a co-payment? Also called a co-pay, it is the amount you are responsible for paying whenever you go to the doctor (your insurance pays the rest). Co-pays generally range from $25 to $35, depending on your insurance plan (it could be $50 if the doctor is a specialist).
What’s a deductible? If you need surgery or a procedure based on your doctor’s recommendation, you are responsible for the first set of costs, called the deductible. Common deductibles are $1,000, $2,500, and $5,000. Generally, the lower your deductible, the more expensive your insurance plan will be. Deductibles have yearly cycles and start over in January.
Important Note: If your deductibles are per incident (not per year), this is a problem! Let me take a look at your policy and get it fixed.
What about coinsurance? Your coinsurance is the percentage of covered healthcare costs that you and your insurance company share after you’ve met your deductible.
For example, with an 80/20 plan, the insurance company pays 80% of the covered costs, and you pay the remaining 20%.
This can be confusing because people sometimes think the insurance company automatically pays 80% of the entire medical bill. That’s not necessarily the case. Your deductible typically comes first, and then coinsurance applies to the covered expenses until you reach your out-of-pocket maximum.
Example: If you have a $2,000 procedure and a $1,000 deductible insurance plan with 80/20 coinsurance, you should expect to pay $1,200.
Some plans pay 100% after the deductible, which means there is no coinsurance.
What does out-of-pocket maximum mean? This is the total amount of money you could end up paying in a single year for health costs. On some plans, once you reach your deductible, you have also reached your out-of-pocket maximum. On other plans, you have coinsurance to pay first. Once you have reached your out-of-pocket maximum for the year, you are done. YAY!
Here’s an example to incorporate everything we’ve learned today:
Let’s say your co-pay is $35 (but $50 for a specialist) with a $1,000 deductible, an 80/20 coinsurance, and a maximum out-of-pocket of $3,000. You go to the doctor because your ear is hurting. You pay $50 (co-pay) for your doctor’s visit because she is a specialist. Unfortunately, though, you find out that it’s more serious than you’d hoped, and you have to undergo ear surgery. That procedure costs $5,000. So, you would pay the first $1,000 (deductible) and 20% of the $4,000 balance, which equals $800 (coinsurance). You should expect to pay $1,800. So, in this example, you would not reach your maximum out-of-pocket.
Hopefully this helps you understand these common terms. Now, you can compare two plans that sound similar but are widely different in cost. Also, you now have the information to understand your current coverage.
I would be glad to look at your plan and point out any red flags I see. I never charge for evaluations or advice. Give me a call at 615-478-7146, or grab a spot on my calendar.
