Trying to determine your annual health care costs? There are several pieces of the cost puzzle to consider, including premiums, deductible, coinsurance, and copay. Below is an explanation of each and examples showing how people use them to pay for health care. For details about your plan’s out-of-pocket costs and covered services, see the Summary of Benefits and Coverage included in your enrollment materials.
An example of how it works: Trisha, 57, plans to focus on her three grandchildren after she retires. Knowing that she will need to keep her energy up, she ends up signing up for a different health care plan at work. the plan premium, or the cost of coverage, will be deducted from her paycheck. Although her new plan has higher premiums, the deductible and copays will be lower. this is important since trisha promised her adult children that she would be more diligent with her own health.
Read more about how health plans with higher premiums often have lower deductibles.
Your new plan will keep your out-of-pocket costs predictable and manageable because, as a former smoker with breathing problems, you need to see doctors and specialists regularly. It will be a while before Trisha retires and becomes a full-time Grammy. Meanwhile, she saves money, listens to her doctors, and enjoys time with her family on the weekends.
what is a deductible? a deductible is the amount you pay out of pocket for covered services before your health plan kicks in.
an example of how it works: courtney, 43, is a single attorney who just bought her first home, a condominium in downtown atlanta. She loves that her building has a gym and pool because she likes to keep fit. when she felt a lump in her breast during a self-exam, she immediately had it checked out. Fortunately, the doctors told her that it was benign, but she will have to undergo a lumpectomy to remove it.
courtney will pay out of pocket for the procedure until you meet your $1,500 deductible, the amount you pay for covered services before your health plan contributes. after that, you’ll pay 20 percent of the costs for the rest of the year because your hospital and doctor are in network. If you have more medical expenses this year, it’s good to know you’ll maximize your deductible right away so you don’t have to pay full price.
learn how you can save money with a health savings account.
what is coinsurance? coinsurance is the percentage of the bill you pay after you meet your deductible.
an example of how it works: ben, 28, is a security expert living in suburban philadelphia with his wife and two young children. His 3-year-old son recently fell on the playground and broke her arm. The family has already met their deductible limit, so Ben will be responsible for only a portion of the costs, or coinsurance, billed for the procedure to reinstate and issue the break. with his 20 percent coinsurance, he’ll end up paying a few hundred dollars for the hospital visit. His health plan will pay the remaining portion: in Ben’s case, 80 percent.
Find out how hospital plans can help you cover costs before you meet your medical deductible.
what is a copay? copays are flat rates for certain visits.
an example of how it works: leon, 34, is a married forklift operator from jacksonville, fl. he is an avid runner, but lately he has had persistent knee pain and swelling. his primary care physician referred him to an orthopedic surgeon. Fortunately, his health plan has some fixed costs, requiring only $30 copays for visits to his regular doctor and $50 copays to see specialists like an orthopedist. him (he once also paid a $150 copay the night he landed in the ER when his knee was so swollen he couldn’t bend it). Having these fixed rates gives Leon peace of mind as he and Leah are saving up to buy a kayak.
It turns out that Leon has arthritis in his knee and needs physical therapy to stay active. his copays extend to physical therapy visits, where he will pay $20 for each session. Leon is determined to get everything back to normal so he and Leah can get back to doing the things they love: spending time together outdoors.
By learning how premiums, deductibles, coinsurance, and copays work, you can better understand your health care costs. Want to read more about the ins and outs of health care plans? learn everything you need to know here.