Understanding Deductibles, Co-Pays, Co-Insurances, and Out-of-Pocket Maximums
Having the right health insurance for you and your family is important. And now that the Health Insurance Marketplaces are open for business, more people than ever will be buying health insurance on their own - just like car insurance.
Understanding these four health insurance terms can help you choose the right plan and help you understand your coverage.
The deductible is the amount you must pay for covered services before your health insurance begins to pay. Insurers apply and structure deductibles differently. For example, under one plan, a comprehensive deductible might apply to all services while another plan might have separate deductibles for covered services such as prescription drug coverage. Deductibles can significantly affect the price of your insurance premium. Typically, plans with lower deductibles offer more comprehensive coverage but have higher premium costs. Evaluating your family’s specific health care needs may help you decide what the right deductible amount is for your budget.
A co-pay, or copayment, is a flat dollar amount you will pay your healthcare provider for a covered service. For example, you may have to pay a $20 copayment for each covered visit to a primary care doctor, and $10 for each generic prescription filled. Copayments vary from plan to plan and are sometimes different depending on the type of covered service you receive. Copayments are usually smaller amounts ($10, $20, $30, $50, etc.), but can add up over time.
Co-insurance is the percentage of allowed charges for covered services that you're required to pay. For example, your health insurance may cover 70% of the charges for a covered hospitalization, leaving you responsible for 30%. This 30% is known as the co-insurance. If the plan has a deductible, you usually pay the co-insurance for covered services after the deductible is met. Co-insurance can also significantly affect the price of your insurance premium. Typically, plans with lower co-insurance offer more comprehensive coverage but have higher premium costs.
An out-of-pocket maximum is the maximum amount of money you will pay for covered services during a benefit period (for example, over the course of a year). The out-of-pocket maximum never includes your premium, balance-billed charges, or services your health insurance plan doesn’t cover. The out-of-pocket maximum will vary from plan to plan but can include copayments, deductibles, and co-insurance. Once you have paid the full amount toward your out-of-pocket maximum, your insurance will pay 100% of the allowed amount for your covered healthcare expenses.
For more, see this list of 73 health insurance terms.
What health insurance terms do you have questions about? Leave a comment below.