What the heck is a deductible? Is coinsurance the same as copay? And why do I still owe the rest of this bill? Health insurance can be a confusing jumble of jargon, but understanding just a few key terms– and how they work together– can demystify your medical bills, and help you make informed decisions about your health care.
If you find yourself confused about what you’re paying for health care (and why) the infographic below shows how some example claims might affect your insurance across a given year. Below that, we’ll dig a little deeper into those examples, as well some common insurance terms you might come across, and get you on your way to understanding health insurance.
Understanding Health Insurance
What Is a Deductible Anyway?
Before we get into the examples, let’s make sure we’re on the same page with a few key terms:
Premium – This is the monthly payment you make to your insurance company in order to have insurance, whether you use it or not. Think of it like your subscription to health insurance!
Your premium will depend on your coverage options and, if you get your health insurance through your workplace, a portion of it is likely paid by your employer.
Deductible – Your deductible is the amount of money that you have to pay for health services before your insurance provider begins to pay its portion. (Some preventive care, like your annual checkup, is not subject to your deductible. This means your insurance plan will pay some or all of the cost even if your deductible has not been met.)
Your deductible is not the same as your out-of-pocket maximum; you will still have to pay a portion of your medical costs after your deductible has been satisfied.
Your monthly premium does not count toward your deductible!
Copay – A copay (or copayment) is a fixed amount that you pay for covered health services. For example, if an office visit costs $100 and you have a $20 copay, your insurance plan would pay the remaining $80. If that office visit instead costs $150, your copay would still be only $20, and the plan would pay $130.
Paying your copay probably won’t contribute to paying down your deductible, but it will likely count towards your out-of-pocket maximum!
Coinsurance – Your coinsurance is the portion of the cost that you pay for covered health services after your deductible has been met. Unlike copay, which is fixed, coinsurance is based on a percentage of the cost.
Keeping with the above example, if a procedure costs $100 and you have a 20% coinsurance, you would pay $20 while your health plan covered the remaining $80. However, if that procedure costs $150, with coinsurance you would now pay $30, while the plan covered the remaining $120.
Out of Pocket Maximum (OOP) – This is the most amount of money you’ll pay for covered health services in a given plan year. This will include all of your coinsurance payments and, depending on your plan, possibly what you’ve paid toward your deductible, but will NOT include your premium. After your OOP max. is met your health plan will pay 100% of the cost for any covered services or benefits!
In-Network vs. Out-of-Network –
In-network just means that your healthcare provider (i.e. your doctor, hospital, clinic, etc.) and your insurance company have negotiated the amount of money that the insurance company will pay for a given service.
An out-of-network provider has no such agreement on price, so you may be responsible for more–or all–of the cost. Additionally, payments towards out-of-network costs may not count towards your deductible or out-of-pocket maximum, and you may even have a completely separate deductible/OOP max. for out-of-network care!
How Does My Insurance Affect My Medical Costs?
Let’s use some examples to show how all of this works together. To start, we’ll say you’ve got an insurance policy with a deductible of $2,000 and an out-of-pocket maximum of $5,000. This plan has a coinsurance of 20%.
Now imagine you come down with a respiratory illness, so you schedule a visit with your doctor. Between all of the tests and medications the bill works out to $300.
Since you haven’t hit your deductible, you would owe the entirety of the $300. But that payment brings your remaining deductible down from $2,000 to $1,700 and your OOP max. down to $4,700.
Later that year, you take an unfortunate spill while hiking and break your arm. Between the hospital bill and the x-rays the total works out to $3,500.
First, you would pay the remaining $1,700 on your deductible. With the deductible covered, you now only owe a 20% coinsurance for the rest of the bill. Of the remaining $1,800, you pay $360 (your 20% coinsurance), while your provider pays the leftover $1,440.
Your remaining deductible is now $0, and your OOP max. is at $2,640.
Note: For some policies or services a coinsurance may be assessed before deductible is met. In those cases, the coinsurance payment does not contribute to paying down the deductible.
Now this turns out to be an unlucky year, and you discover that you’ll need knee surgery. After all is said and done the cost will be a whopping $20,000.
Your deductible is met, so you would only owe your 20% coinsurance. That would usually work out to $4,000 (20% of $20,000) BUT… you’ve only got $2,640 remaining on your out-of-pocket maximum!
You pay $2,640 and your insurance provider covers the rest of the $17,360.
Any further covered services during this plan year would be paid 100% by your insurance provider!
Conclusion
Now you should have a basic idea of how your insurance coverage will affect your medical costs, as well as how your medical costs will affect your insurance obligations. Of course, the specifics of your coverage will depend on the details of your insurance policy. With this understanding, you should be able to make a more informed choice when selecting what health services and products are right for you!
If you’re ever unsure if one of our products is covered by your insurance, Aeroflow will gladly help you find out where you stand on your deductible and which brands best fit your coverage!
