When shopping for a new health insurance plan, one of the main challenges a lot of people face is to understand insurance terminology. As you know, medical expenses are so high in the U.S. that you cannot afford hospital bills without health insurance. Even with health insurance, there are so many types of insurance plans with different coverage options. To shop smart, work with a health insurance broker like Skyline Benefit. It is also useful to take a few minutes to understand the five main health insurance definitions below.
Premium is the amount you need to pay for your health insurance plan. Generally, you or your employer pays monthly, quarterly, or annually. you usually have to pay other costs for your health care, including a deductible, copayments, and coinsurance. Failure to pay your premium may result in loss of medical coverage.
When shopping for a plan, keep in mind that the plan with the lowest monthly premium may not be the best match for you. If you need much health care, a plan with a slightly higher premium but a lower deductible may save you a lot of money.
Your deductible is the amount that you must pay each year before your health insurance kicks in and starts covering your medical costs. Some expenses, like an annual check-up or doctor’s visit, might not be subject to the deductible, depending on your plan. However, even after you have fully paid your deductible, covered services may still have a copay or coinsurance, depending on your plan benefits.
Coinsurance is another type of medical cost sharing method that requires you to pay a portion of the medical cost. In other words, medical expenses are divided between you and your insurance company by a certain percentage. For example, let’s assume that your insurance has a deductible of $4,000 and a coinsurance of 30% for hospital stays. If there is a $10,000 hospital bill, you would need to pay $4,000 first. Then, the remaining $6,000 will be shared 70% with the insurance company and 30% with you.
Generally, plans with low monthly premiums have higher coinsurance, and plans with higher monthly premiums have lower coinsurance.
Copay or Copayment
A copay (or copayment) is a flat fee that you pay on the spot each time you go to your doctor or fill a prescription. For example, if you hurt your back and go see your doctor, or you need a refill of your medicine, the amount you pay for that visit or medicine is your copay. In general, copays are a fixed amount, not a percentage. In other words, it is the money you pay every time you use insurance. Copays can vary for different services within the same plan, like drugs, lab tests, and visits to specialists.
Generally, plans with lower monthly premiums have higher copays. Plans with higher monthly premiums usually have lower copayments.
Your out-of-pocket maximum is the most money that you will have to pay for covered medical services in a given year. You can think of it as an annual cap on your health-care costs. Once you reach the limit, the plan covers 100% for covered medical expenses for the rest of the year. This includes all amounts paid by you for co-pays, coinsurance, or other reasonable medical expenses. However, this limit does not include your premiums or non-essential health benefits.
Depending on your plan, covered services and the amount of your out-of-pocket maximum will vary. For example, your out-of-pocket maximum for a Covered California plan for 2021 will not exceed $8,200 for individuals and $16,400 for families.
Working with a health insurance broker can save you a lot of headache throughout your shopping process. That is why it is important to take your time finding your ideal health insurance broker. When you invest that time, you will find someone that you like and trust. Skyline Benefit is an independent health insurance broker with a variety of individual and business health insurance options and price points. Call for a free consultation today (714) 888-5112