Health Insurance 101
Is your health insurance plan starting fresh on Jan. 1? Health insurance is a confusing topic to a lot of people. In fact, a recent study shows that while about three out of four Americans ages 22-64 believe they know how to use health insurance, only about one in five can correctly calculate how much they owed for a routine doctor visit. Becoming educated on your benefits allows you to more effective use health care services and save money in the process. Welcome to Health Insurance 101!
Here are some basic definitions everyone should know:
Deductible – the amount you pay for health care services before your insurance begins to pay. Usually expenses related to hospital stays, surgeries and procedures are applied to your deductible first.
Co-payment or Co-pay – the cost for routine visits that don’t apply to your deductible (such as doctor visits or prescriptions). This is a set dollar amount ($20 per visit, or $10 for a generic prescription, for example).
Coinsurance – your share, or percentage, of costs for a health care service after your deductible is met until you reach your out-of-pocket maximum.
Out-of-pocket maximum – the most you’ll have to pay per calendar year. These amounts are different for an individual vs. a family.
Preferred Provider Network (PPO) – a group of hospitals, clinics, doctors and other care providers that provide health care to its members for negotiated fees. When you receive care from a doctor of facility in your PPO network, you pay less.
Premium – the amount you pay for insurance each month.
Tying it all together
Let’s say you were in a bad car accident and broke multiple bones requiring many surgeries and a long hospital stay. Your total bill is $100,000. Your deductible is $2,000, your co-insurance amount is 20 percent and your out-of-pocket maximum is $5,000. You would pay all expenses until you reach your $2,000 deductible. At that time, you would pay for 20 percent of your care until you reached your out-of-pocket max of $5,000. At that time, your insurance company would cover the rest of the costs.
How do I choose a health plan that will work for me?
Everyone is different and it’s important to choose a health care plan that works best for you based on what you can afford and what kind of care you need. If you are relatively healthy, you may choose a higher deductible plan where you will have lower monthly premiums, but you’ll need to come up with the money if you get really sick or need surgery. If you have a family with small kids, or a chronic illness, you might choose to pay higher premiums for a plan with lower co-pays, deductible and out-of-pocket max. A little education on health insurance can go a long way in choosing and utilizing your benefits.
1 AIR Health Insurance Literacy Survey, 2013