The way health insurance has evolved in the past 10 years has resulted in confusion, frustration, and general discontent for subscribers. People don’t like it. They don’t understand it and when they try to use it, they don’t know what to do. Many parts of the Affordable Care Act (Obamacare) were designed to attempt to make health insurance easier to understand and more uniform. For example, for an insurance company to offer a Qualified Health Plan, it has to have an unlimited maximum out-of-pocket, and that out-of-pocket needs to include co-pays…. But a bill passed by the federal government isn’t going to educate consumers about how to use an insurance plan. My attempt here is to define some of the most confusing terms in health insurance.
Premium
This is just a complicated way to say monthly-payment. Your premium needs to be paid in advance of the month you intend to have coverage. For Nevada Health Link, it needs to be paid by the 15th of this month for coverage beginning the 1st of next month. If you miss it, it bumps your coverage effective date out another month.
Deductible
The deductible is probably the most confusing term in health insurance, and probably the most misunderstood. They sound good – like a discount! It’s not. When you go in to the hospital, lets say for surgery or something major, the deductible is the amount you pay before the insurance kicks in. Yes, in addition to paying the monthly premium, you also need to pay when you go to the hospital. Why would you do this? Because plans with higher deductibles cost less per month.
By federal law, this amount cannot be more than $6,350 (2014) and $6,600 (2015).
Co-insurance
Co-insurance (in health insurance only) is when the insurance company takes a percentage of the cost. This usually applies after the deductible. If it’s 80/20 co-insurance then the insurance company pays 80% and you pay 20% of the medical bills. The insurance company will always be taking the greater amount (80%).
Co-pay
Co-pays are fixed amounts you pay for specific services. The most frequent I see is usually the doctors office co-pay. When you go to the doctors office you might pay a $25 one-time fee per visit. From there the insurance company picks up the rest of the cost. This is a co-pay.
Maximum Out-of-pocket
The Maximum Out of Pocket (Max OOP) will be the most you will pay for medical bills in a given year. For fully qualified health plans, this includes everything, EXCEPT the monthly premium. The monthly premium needs to be paid no matter what.
Example A:
Currently on a health insurance plan with a $1,000 deductible, 50/50 co-insurance and a $4,000 max oop. I receive a medical bill for $5,000, how much do I owe?
I pay the first $1,000. This is my deductible. This brings the bill down to $4,000. My co-insurance applies after my deductible, so I split this $4,000 50/50 with the insurance company, leaving me with $2,000. Add my deductible and I owe a total of $3,000 for this $5,000 bill. Confusing Terms in Health Insurance
If I go to the doctors office again in the same year, I don’t need to “satisfy my deductible” (pay the deductible again). If I received any more bills, the insurance company would split them 50/50 (co-insurance) till I spend $4,000 of my own money (maximum out of pocket). Once I hit the max out-of-pocket, the insurance company takes up 100% of the cost.
Example B:
I have a health insurance plan with a $1,000 deductible, 50/50 co-insurance and a $4,000 max oop. I receive a medical bill for $500, how much do I owe?
$500 is below your $1,000 deductible, so you owe the entire $500.
If you have any questions about any of these terms please contact Health Benefits Associates. We try to make health insurance as easy to understand for our clients as possible.
