In order to buy the right individual health insurance plan, it is important to research and compare coverage with a clear understanding ofhealth insurance terms. However, many of these words confuse consumers who have a vague sense, but not necessarily a firm grasp, of what they mean.
Coinsurance, copay and deductible are top culprits. They seem interchangeable, but they are not. Each one impacts the total cost paid for health care. Knowing which is which will help you make an informed decision. Here is a brief explanation to help keep them straight.
The deductible is the dollar amount you must pay for health care before your health plan’s benefits kick in. When purchasing coverage, you select the deductible amount you wish to pay; for instance, $2,500, $5,000, $7,500 or $10,000. Your monthly premium does not contribute toward this amount.
Those who want to keep monthly premiums low—typically those who will not frequently use medical services—may select higher deductibles. Those who anticipate using their health insurance regularly may select a lower deductible—it should be noted that this translates into a higher monthly premium—so that they owe less out of pocket before the insurance company starts contributing its share.
Not all medical care will be subject to your deductible; it all depends on plan details.
Also known as a copayment, a copay is the flat fee consumers may pay for medical treatments and services. These vary by plan design and often include separate copays for physician office visits, prescription drugs, ER visits, surgical services and hospital confinement.
You must typically pay your copay up front, at the time medical care is received. The amount will likely be printed on your card. For instance, if your physician office visit copay is $10, then you will pay $10 every time you go to the doctor. You will still be responsible for your deductible and coinsurance, as well as any additional out-of-pocket expenses, once the services have been billed.
This term refers to the percentage of medical costs you owe once the insurance company covers its share. This typically kicks in once the consumer’sdeductible has been met. If the insurance company pays 80 percent for covered care, then the consumer will pay the remaining balance—20 percent.
When it comes to coinsurance, the dollar amount you owe will vary because medical bills vary. The patient is often charged after the insurance company has paid its portion.