But the premium is just part of the price. Most of the time, you will also have to pay part of the cost when you get medical care—this is called your “out of pocket” cost. Before you sign up for a health insurance plan, you should find out how much the plan will pay when you get care and how much you will have to pay.
An insurance plan may have a “deductible,” “coinsurance,” “copayments” (or “copays”), and an annual “out-of-pocket limit.” Together with your premiums, these four things will determine your out-of-pocket costs.
- Deductible: This the amount you must pay for certain services before the insurance company will pay for any of your medical expenses. Your deductible might apply to each accident or illness, or it might be an “annual deductible” that applies to the year.
For example, if your plan’s annual deductible is $2,000, you must pay 100 percent of your medical expenses until you have paid $2,000. After that, the insurance company will pay some or all of the cost. If you break your leg and get a bill for $7,500, you will pay $2,000, and the insurance company will pay some or all of the remaining $5,500. If you get sick or hurt again that year, the insurance company will pay the entire cost (except for any coinsurance; see below).
- Coinsurance: After you reach your deductible amount, you might have to share the cost of some medical expenses with the insurance company. This is called “coinsurance.” The coinsurance amount is the percentage you must pay; the insurance company will pay the rest.
For example, if your insurance plan includes 20 percent coinsurance, and you get a medical bill for $500 for a sprained wrist after reaching your annual deductible amount, you will pay 20 percent of the bill, or $100, and your insurance company will pay 80 percent, or $400.
- Copayment: You might have copayments—or copays—for some medical services. A copay is a fixed amount you will pay for a specific healthcare service or for a prescription. You might have different copays for different medical services or for different types of prescription medications.
For example, if you have an appointment at a doctor’s office, your copay might be $25; but if you go the emergency room, your copay might be $200. When you get a generic prescription medication (one that does not have a brand name), your copay might be $15; but if you get a brand-name medication, your copay might be $50.
- Annual out-of-pocket limit: This the maximum you will be required to pay for covered medical expenses in any one year, not including your premium.
For example, if your plan has an annual out-of-pocket limit of $4,000, after you have spent $4,000 to pay medical bills for covered services during one year, the insurance company will pay 100 percent of the cost of covered services for the rest of the year.
As you can see, many things are included in the cost of health insurance. If you want to know what an insurance plan will really cost, you need to look at all of these things—the plan’s premium, deductible, coinsurance amount, copays, and annual out-of-pocket limit.