Copays, Coinsurance, Deductibles And More: How To Effectively Compare Health Insurance Plans
For many people, understanding the lingo used in health insurance policies is a challenge. Unfortunately, this can make comparing plans quite difficult. Plans with low premiums may result in prohibitively high medical bills. On the other hand, you may not end up needing much medical care in the coming year at all — is it worth it to pay the high premiums charged by comprehensive health insurance plans? To help you know what to focus on when you compare policies, read on to find out how the different coverage structures in health insurance work.
Copays
Copays are the easiest aspect of health insurance to understand. You pay them at the point where you receive care. For example, your policy may have a $250 copay for emergency room services. If you go to the emergency room, you'll pay $250 to the hospital right away. The insurance company will later pay the rest of the fee that the hospital charges. In most cases, copays represent a serious discount over usual hospital pricing.
Deductible
The deductible amount on your policy is the amount of money you have to pay before health insurance begins to help you with your medical bills. For the majority of health insurance policies, copays don't count towards your deductible — only bills that you receive from medical providers after receiving care will apply. However, some insurers do count copays towards your deductible amount for the year. Once you've met your deductible for the year, coinsurance begins.
Coinsurance
Coinsurance is listed as a percentage on your policy statement, and it's the amount that you personally pay to medical providers. Your insurer covers the rest of the bill. For example, if you have 20% coinsurance for hospital admissions and receive a $10,000 bill after an inpatient stay, you'd be responsible for paying $2,000 out of your own pocket. Your health insurance will pay the rest of the amount to the hospital.
One thing that many people overlook when it comes to health insurance is that you're receiving a discount on your medical bills before you even see them. Insurers negotiate pricing with in-network medical providers, and the negotiated amounts are substantially less than the amount a provider would charge an uninsured patient. When you combine coinsurance and the rates your insurer has negotiated, you're paying drastically less for health care than an uninsured person would be.
Prescription Drug Coverage
Drug coverage is an area where things can be slightly complicated. Health insurance companies have a formulary that lists which drugs they cover and what price tier they're on. Low-tier drugs (mostly generics) will usually require a copay that is paid to the pharmacy where you pick up your medication. High-tier drugs (usually brand names that are less commonly prescribed) use coinsurance rather than a copay. You'll pay a portion of the drug's retail price and the insurance company will cover the rest. When comparing plans, it's important to find one that has most of your current medications on the copay tier.
Because of the way the drug tiers in the formulary work, it's best to have as many prescription drugs as possible on a copay system. The problem is that your doctor doesn't know which are on the formulary and which are not — urban areas can have dozens of insurance plans using different formularies, and they change from year to year. It's impossible for physicians to keep track.
A tip for saving on prescription drug costs with health insurance is to bring a copy of the formulary with you to your doctor's appointments. Your doctor can quickly scan the formulary and suggest medication that's covered by your plan.
Out-of-Pocket Maximums
Finally, the out-of-pocket maximum is the absolute limit you'll pay for covered medical care in any given year. Once you've exceeded this amount, your health insurance company picks up the rest of your bills. For intensive treatment such as chemotherapy, it's not unusual to hit the out-of-pocket maximum by spring, so this feature of health insurance can save you an immense amount of money.
Finding the best health insurance plan for you involves estimating the amount of medical care you expect to need in the coming year. Plans with low copays for outpatient visits are good for people who are managing several chronic illnesses, while a plan with a high deductible and out-of-pocket maximum is suitable for someone who doesn't expect to need much medical care at all. Above all, however, remember that having a health insurance company negotiating rates with providers for you is better than not having insurance at all — when you do receive medical care, you'll be getting a discount by default.