Once you’ve paid your insurance premiums for health coverage, you might assume that your financial obligation for health care is complete. But this is hardly the case. Your insurance policy may cover a lot of costs, especially if you’re shelling out the dough for a pricey and comprehensive plan. But in nearly every case, you are going to find that you’re responsible for at least a portion of medical expenses on a year-to-year basis. And it’s important to understand what your financial obligations are and how they differ.
There are three types of payments you might be expected to cover where health insurance is concerned: deductibles, co-pays, and coinsurance. Most people are familiar with the first two. A deductible is the portion of medical expenses for the year that you’re required to pay out-of-pocket before your insurance takes over the majority of payments. While most Grade-A carriers offer many benefits from day one of coverage, including significant in-network discounts, if your deductible is $500 then you will need to pay that much before the insurance company starts to pay a significant amount of your medical bills.
As for a co-pay, this is the fixed amount you will pay in-office at the time you receive services. But coinsurance is something different, and you should be familiar with it since it affects so many policy-holders. Once you’ve paid your deductible, your insurance provider will start to pay for your medical expenses. Right?
This is more or less accurate. But if your policy includes stipulations for coinsurance payments, you will have to pay a portion of your medical bills after the deductible has been paid. Generally, your insurer will pay the lion’s share of this amount, although the actual percentage depends on your policy. But you will be expected to pay the remainder. If your insurance provider pays 80%, for example, you will be billed for the other 20% of all medical bills — this is commonly referred to as “an 80/20 plan” and there are 50/50, 70/30 and even 100/0 plans.
The trade-off for any insurance benefit is paying now versus paying later. If you want to lower monthly payments for your health insurance, you’re going to pay more for your deductible, your co-pay, or your coinsurance amount (or all of the above in some cases). But if you want to reduce or eliminate coinsurance payments, you’ll simply have to pony up the dough for higher monthly premiums. So the choice you make will probably be based on what you can afford to pay up front versus anticipated medical costs. If you know you visit the doctor frequently (for allergies, chronic conditions, and so on), you might save more by increasing your premiums and lowering your coinsurance percentage. But if you rarely visit the doctor, you may be better off selecting lower premiums and higher coinsurance based on the assumption that you won’t be paying coinsurance costs very often. You simply have to assess your situation to decide which options are best for you and this is best done with a licensed agent.
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