Once you know how the different parts of health insurance work, you can make smarter choices about choosing a plan that fits your needs and your budget. Keep reading to find out more about health insurance costs and what they mean for you.
Premium is the amount you pay each month for health coverage. When you purchase a health plan, the cost of your monthly premium is based on several factors - your age, tobacco use, where you live, the plan’s provider network and level of coverage.
You may be tempted to look only at monthly premiums when budgeting for a health plan, but it’s important to consider other costs and what makes the most sense based on your own needs and health status.
For example, if you have a plan with a lower monthly premium, you may pay more for your health expenses before your insurance starts sharing costs. On the other hand, plans with higher monthly premiums usually mean lower out-of-pocket expenses when you receive care.
The out-of-pocket maximum is the most you will pay in a year for covered services from network providers. If you’ve ever had a serious injury or illness, you know that costs can add up fast. An out-of-pocket maximum helps protect you financially because you know that if something were to happen and make your expenses skyrocket, they will never cost you more than the out-of-pocket maximum dollar amount you chose in the beginning.
So what counts toward your out-of-pocket max? Coinsurance, deductibles and copays apply, and once you meet the maximum, your health plan will pay covered costs at 100% for the remainder of the calendar year.
Your deductible is the dollar amount you pay for all of your health care needs before your plan starts sharing a percentage of your costs. Plans include deductibles for each individual person who is covered, and they also include family deductibles. Once you reach your deductible, you’ll pay a lower percentage of your health care costs, or coinsurance, until you reach your out-of-pocket maximum. For example, if your plan has a $4,000 deductible and a 20% coinsurance, it means that you will pay the first $4,000 of expenses out of your own pocket and for everything after that, you will pay 20% of the costs, with your health plan covering the other 80%, up until you hit your plan's out of pocket maximum.
Remember, deductibles are different for most plans and can be as low as $0. But it’s important to know that plans with low deductibles can also mean your other costs are higher (premiums and/or coinsurance).
A copayment, or copay, is the fixed amount you pay when you get certain types of care - such as a doctor’s office visit or when you pick up a prescription drug from the pharmacy. Having a copay for these benefits can help you control the costs of things you know you will use regularly. The amount of your copay can vary depending on your plan’s benefits. For example, plans with lower copays may have higher monthly premiums. Knowing your copay can help you budget for your medical care, so be sure to check the copays included in your plan. These copays will count toward your plan's out of pocket maximum.
Coinsurance is the percentage you pay for the care you receive once you’ve met your deductible. If you have a 20% coinsurance, you will pay 20% of your expenses and your plan will pay the other 80% of covered costs.
If you choose not to buy insurance, there may be other costs you need to think about. You may have to pay a tax penalty depending on your income, family size and how long you’ve been uninsured. Click below to learn more about this penalty and what you can do to avoid it.