Breaking Down Insurance Terms
Ever been confused about the different insurance terminology? You’re not alone. Many people have a basic understanding of how their insurance works, but not everyone knows the nitty gritty of what those terms mean for your health care coverage and costs. In this post, we’ll break down some of the most common insurance terms, and how they affect your medical bill.
Deductible - the amount you pay for covered health care services before your insurance plan starts to pay.
Many people confuse their deductible with their premium, but they’re completely separate things. Your premium is the amount you pay to receive health insurance, but your deductible is what you’ll pay before your health insurance starts to pay. For example, if your deductible is $1,000 then you’ll have to pay for $1,000 of health care services before your insurance will begin paying for those same services. That’s why its important to choose a policy with a lower deductible amount. It’s also important to note that most deductibles reset on January 1st, so if you’re unsure what you’re deductible amount is, make sure to call your health insurance carrier to have an accurate idea of what you’ll owe.
Coinsurance - the amount you’ll pay for covered health care services in addition to what you’re health insurance pays.
Coinsurance is not the same as a copay. While a copay is typically a set cost for services, coinsurance is often a percentage. It’s important to understand your coinsurance costs in order to correctly estimate how much you may owe for any given service.
For instance, let’s say you have a $25 copay for specialist office visits. This means that if you see a specialist and the visit costs $500, then you’ll only be responsible for $25 dollars of that medical bill. But let’s say you have 20% coinsurance on chemotherapy. That means that if you receive $500 dollars of chemotherapy, you will owe $100 every time you get that chemotherapy treatment. And because your coinsurance is a percentage, the amount you owe can increase or decrease depending on how expensive your chemotherapy treatment is. You will owe that 20% coinsurance until you reach your maximum out of pocket amount.
Max Out of Pocket - the amount you must pay toward your medical bills until your insurance covers the complete costs.
Max out of pocket is exactly how it sounds, it’s the max amount of money you will have to pay out of pocket for your medical care each year. So if your max out of pocket is $3,000, then you will have to pay copays and coinsurance on medical treatment until you’ve spent $3,000. At that point, you will no longer owe anything for medical care, and your health insurance plan will pay for everything. Some plans allow for the deductible costs to go towards your maximum out of pocket, and others do not. This is why it’s beneficial to choose a health insurance plan that has both a lower deductible and a lower max out of pocket amount. It’s important to remember that the max out of pocket also resets each year (often on January 1st).
Those are some of the most common health insurance terms you’ll encounter. If you have any questions about your health insurance coverage, or what something means, contact your insurance carrier.