INSURANCE EXPLAINED; in Layman's Terms. Understand how your Insurance works from Deductible, to Co-Insurance, to Max Out Of Pocket (OOP), and Co-Payments too!
For those not formally educated and trained in how it works, Insurance can be hard to understand. Due to that I decided to put into Layman's terms some terms you are probably familiar with, but may not know exactly how they work. Let's discuss:
Deductibles
Co-insurance
Max Out of Pocket (OOP)
Co-payments
in more detail so you can understand what you are purchasing, when you purchase health insurance at Open Enrollment next year.
CO-PAYS: These are a flat fee chosen by the insurance company that you will pay to a Doctor, Specialist, or Outpatient Mental Health INSTEAD of paying a Deductible for these services. Some plans include Co-Pays for a Vision appointment. Most range from $25-$35. Sometimes these are limited to 2 per year on a Bronze plan. Most Health Savings Account (HSA) plans do not offer Co-Pays as you must pay the Deductible for ALL services. I'll discuss HSA plans and the Tax Advantage they offer in an upcoming article...keep posted.
DEDUCTIBLE: The amount you must pay for Major Services before your Co-Insurance kicks in. Deductibles Range from about $0 - $1,500 on Gold plans, $2,000 - $3,500 on Silver plans and $5,000 - $7,150 on Bronze plans.
CO-INSURANCE: Co insurance is usually paid as 80/20, 70/30 or 50/50. You pay the 20%, or 30% or 50% and the Insurance company pays the other percent. So you pay 20% and the insurance company pays 80%
MAX OUT OF POCKET (OOP): The Max OOP is the MOST you will pay in a calendar year for your health insurance costs, as long as you use doctors and hospitals in your insurance company's network. For 2017 that figure is 7,150 or less per person, depending on what limit each insurance company put on each plan they provide. Bronze plans have the highest Max OOP, with Gold being the lowest Max OOP plans. An insurance company cannot charge more than 2 times the Deductible per family and 2 times the Max OOP per family in a calendar year, for In Network usage.
BELOW is an EXAMPLE of how CO-PAY, DEDUCTIBLE , CO-INSURANCE & MAX OUT OF POCKET WORK work with your Health Insurance:
CO-PAY: Each time you go to the doctor you will pay your Co-Pay, which is a flat fee, for the visit. You will be responsible for any lab, x'rays, or prescriptions which the doctor prescribes at this visit as they are not included in your co-pay. HSA's will not have a co-pay up front because you must pay the full deductible for all services rendered, before an Insurance company will pay anything for you on an HSA plan.
DEDUCTIBLE, CO-INSURANCE & MAX OOP: When a bill comes in for a major service, such as an ambulance ride, overnight stay in the hospital or MRI, you will be responsible to pay the amount of your deductible first. After you have paid the amount of your deductible, most times, you will have to pay a co-insurance amount. Most co-insurances are 80/20, 70/30 or 50/50. That means you pay the next 80% of each bill that comes in, up to the Max Out of Pocket (OOP) for your plan, for all doctors and hospital charges which are in network charges. The insurance company pays the 80% that you didn't pay (if your co-insurance is 80/20). After the Max Out of Pocket is paid you would owe 0% (as long as you used doctors and hospitals whom are in network) and the insurance company then pays 100% of all future bills until Dec 31st. Each year you start all over having to pay your deductible, co-insurance and Max OOP.
EXAMPLE: Your deductible is 2,500 and your Max Out of Pocket is 7,150 (7,150 is the most which can be charged for 2017) and your co-insurance is 20%
You pay the first 2,500 of a 15,000 claim and that leaves 12,500. You are then responsible to pay 20% (or 30% or 50% depending on the plan you choose) which is an additional 2,500. The insurance company pays the other 80%. That means for this claim of 15,000 your total is the deductible of 2,500 and the 20% coinsurance above of 2,500 for a total of 5,000. You would NOT have met your Max Out of pocket for the year (7,150) so the next bills which come in you are responsible to pay 20% of each one, until you have reached a total paid of 7,150 (INCLUDING the 2,500 deductible). Keep in mind that co-pays do not go towards the deductible in most cases and neither do prescriptions; however they do go towards the Max Out of Pocket for the year.