You’re fit, fun and healthy! You never get sick, so you don’t really have to worry about health insurance. That’s an often repeated narrative that we hear it in the news media, from our elected officials and sometimes even the HR personnel at your jobs. Maybe you’ve even repeated it to yourself as you mouse hovers over all your employer’s health insurance offerings during open enrollment season. But don’t let the myth of being “eternally healthy” keep you from making smart decisions as they relate to your health care and your finances. Yes, health insurance is confusing. And, sure, you may not really need it right now. But familiarizing yourself with these health insurance terms can help you track your spending and empower you in interactions with your doctor’s billing office and health plan reps.
Your deductible is the amount of money you have to pay for health care services before your insurance plan pays for anything. And personally, when assessing how much I can afford/want to pay for health care over the course of a year, I start by comparing the deductibles of different plans.
Being somewhat of an anomaly (a young person with a chronic illness), I am a fan of the “low-deductible plan.” I know that I’m going to use health care services every year, beyond the annual preventative physical. So I want to pay as little as possible before my health insurance takes over. Low-deductible plans often come with a higher monthly insurance premium.
Lower monthly premiums usually buddy up with “high-deductible plans,” which the IRS defines as any plan requiring the individual to pay at least $1,350 before the insurance company contributes.
Your deductible is not a secret or surprise. You know what it will be as soon as you sign up for health insurance. So in addition to paying your monthly premium, set aside some extra money every month to cover your deductible. High-deductible plans allow you to set up a health savings account (HSA NOT FSA) where you can deposit money specifically for health expenses.
Once you’ve met your deductible, the copay for your insurance plan comes into play. This is a portion of money that you pay toward a health care service.
Before meeting your deductible, you might have to pay $100 to see your primary care physician. When you meet the deductible (be it $500 or $1300) you should only have to pay a fraction of that cost, maybe $20 to $30 for the visit. Sometimes you have to pay more for specialists or certain services, like getting a CT scan or an MRI.
Just like deductibles, health service copays aren’t a secret. Get ahold of your insurance plan’s health care service charts or create an account on their website to view your plan’s set copayments for any service you need to get or are considering.
I’ve noticed that this is a term that trips a lot of people up. The main question: What’s the difference between a copay and coinsurance? For one, not all insurance plans have copays, and not all plans have coinsurance.
The insurance plan I’ve used for the past couple of years has required me to pay coinsurance after meeting my deductible. With coinsurance, I pay a percentage of each health care service I receive. My current coinsurance is 20 percent. So a $100 doctor’s visit would cost me $20 after meeting my deductible.
Let’s just say you’re having an off year. You went from being perfectly healthy–not one sneeze or sniffle or even a raspy throat–to blocking off sections of your calendar to make time for repeated visits to the doctor. You’ve paid your deductible, now you’re shelling out different amounts of cash before every X-ray and lab test. It’s a lot, and eventually you start wondering, how much more money can they take?! Don’t worry, there is a limit. It’s called the out-of-pocket maximum and it’s the maximum amount of money that you will pay on health care services over a one-year period.
Let’s say your plan offers has an out-of-pocket maximum of $1000. If your deductible is $500, and you meet your deductible, then you’re only halfway to the max. All the copayments or coinsurance you pay after reaching your deductible would have to add up to $500 to meet the $1000 out-of-pocket max. But once that maximum is reached, you pay nothing else for all health care! This includes visits to specialists, MRIs, blood-draws, X-rays, surgeries and hospital stays. A recent hospital stay for me cost about $33,000. Of course, thanks to my maximum, I did not have to pay that.
Reaching your out-of-pocket maximum can be a blessing and a curse. On one hand, it indicates that you’ve probably had to use a lot of health care services in one year, which is never fun. But on the other hand, reaching that limit puts you in a good position to get some “free” health care to take care of some things you’ve have been putting off. You can go see that podiatrist for a lingering foot issue, or finally getting that mole you’ve been wondering about looked at. But remember to take care of these health care “extras” before the plan year ends so that you don’t have to pay anything for that service. Once January 1 hits, it’s back to meeting the deductible and out-of-pocket max.
Jewel Edwards-Ashman is a writer, editor and aspiring YouTube hip-hop dancing sensation. She’s an INFJ who loves getting into deep conversations about health care, money and the best ways to prepare the perfect roast chicken.