Your health insurance deductible may be hard to understand. How does it differ from co-payments, co-insurance and Out of Pocket Maximums? This article will help you understand how your health insurance deductible works in context with the rest of your policy.
What It All Means
What Is A Deductible?
What About Co-Insurance & Out of Pocket Maximums?
How Are Co-Payments Different?
A deductible is the amount a policy holder must pay before health benefits are paid out by the health insurance company for benefits not subject to co-payments. Deductibles are set on a calendar year basis. After your annual deductible has been satisfied, the insurance company will begin paying your benefits per the policy’s co-insurance agreement and out of pocket maximum for the rest of the policy period (more on those in a minute).
This does not typically apply to doctors visits, but are more common for procedures or hospital stays. Let’s say your health insurance has a $1,000 deductible. If you break your arm and incur a $5,000 hospital bill, you are responsible for paying the $1,000 deductible before your health benefits pay for the remaining $4,000 on a coinsurance basis.
Co-insurance is a percentage of health care costs the policy holder is responsible for paying after the annual deductible has been met. The most common split is 80/20 with the insurance company paying 80% of associated medical costs and the policy holder paying 20%. This arrangement continues until the policy holder has met their predetermined out of pocket maximum they are required to pay for the year. Usually set at a couple of thousand dollars or so, once this out of pocket maximum has been met, the insurance company will pay 100% of covered services for the remainder of the year.
Just like deductibles, co-insurance is typically not required for doctors visits and is more commonly applied to procedures. So, assuming your deductible has already been satisfied for the year, a $10,000 medical procedure would only cost you $2,000. Furthermore, if your out of pocket maximum for the year was $2,000, the next time during the same policy period that you required a hospital stay or some kind of procedure, your insurance company would pay for the entire bill.
Co-payments are smaller fees that are owed at the time service is rendered. Usually ranging from $15 – $50, co-payments are most commonly collected by the health care provider during doctors visits and at the pharmacy when paying for prescription medication. Co-payments are designed to discourage policy holders from abusing the health care system by needlessly running to the doctor every time they sneeze or cough.
Essentially, your health insurance deductible is designed to give you some skin in the health care cost game. Once this has been met, things become financially easier for the remainder of the policy period. It can all be confusing at times, but now you should have a better understanding of how your health insurance costs are handled. To learn more about health insurance, call us at 678-715-9671.