Did you ever look at an 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 it down for you:
What is a Co-Payment? Also called a co-pay, it means the amount of money you are responsible to pay whenever you go to the doctor (your insurance pays the rest). Co-Pays are generally range $25 to $35, depending on your insurance plan (it could be $50 if the doctor happens to be a specialist).
What’s a Deductible? If you have to have a surgery or procedure based on your doctor’s recommendation, you are responsible for the first set of costs, called the deductible. Common deductibles are $1000, $2500 and $5000. Generally the lower your deductible, the more expensive your insurance plan will be. Deductibles run in a yearly cycle and start over in January. Important Note: If your deductibles are per incident instead of per year, this is a problem! Let me take a look at it your policy and get it fixed.
What about Co-insurance? Your co-insurance is the set of costs that you and the insurance company share after the deductible has been met. For example, if you have an 80/20 plan, it means that your co-insurance is being paid 80% by the insurance company and you are paying 20%. This can be confusing because people often assume incorrectly that the insurance company is paying 80% of the total bill and they will be stuck with the rest.
Example:
If you have a $2000 procedure and a $1000 deductible insurance plan with an 80/20 co-insurance, you should expect to pay $1200.
Some plans pay 100% after the deductible, which means no there is no co-insurance.
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 co-insurance 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 $1000 deductible, an 80/20 co-insurance and a maximum out-of-pocket of $3000. 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 an ear surgery. That procedure costs $5000. So, you would pay the first $1000 (deductible) and 20% of the $4000 balance – which comes out to $800 (in co-insurance). You should expect to pay $1800. So in this example you would not reach your maximum-out of pocket.
Hopefully this helps you understand what 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 begin to understand the plan you currently have. 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.
