Everyday we receive numerous questions from consumers who are shopping online for Individual Health plans. To quickly answer common questions, we have created this section on our Web site to assist you in educating yourself to make an informed decision. Our licensed agents will gladly discuss these questions in more detail or review any other health plan topics that you want to understand.
The short answer is “the portion of the cost for medical goods, services and other care that the insured has the responsibility of paying themselves.” Insurance companies sometimes do not cover the complete cost of a medical expense. Depending on the policy benefits as defined in the terms, limits, and exclusions of your policy, certain parts of your medical bills could be considered the patient’s responsibility. Some examples of out-of-pocket costs include:
Deductible: This is a predetermined amount of money that the insured must pay first before the insurance company will begin to consider reimbursing for covered medical expenses. For example, if you have a $500.00 plan deductible, the insurance company will not pay anything towards the cost of your bills until $500.00 worth of claims are reached. Only claims over $500.00 will be considered by the insurance company for payment.
Co-insurance: This is usually stated as percentage in your policy. It is the cost you are expected to share with the insurance company when charges are paid. For example, if you have already satisfied your plan’s deductible, and the insurance company approves $1,000.00 worth of charges, the insurance company then pays a portion of them (say 80% or $800.00), and the balance (20% or $200.00 of co-insurance) will be the insured’s responsibility to pay.
Co-payment: This is usually a fixed dollar amount that is attached to each specific type of medical expense and is expressly defined in the plan’s benefits. For example, a visit to your primary care physician for a physical may cost you a $15.00 co-payment. The balance of the cost for this service is then paid by the insurance company.
Preventative care coverage varies depending on the insurance carrier and the plan you select. Recent market trends have made this benefit more popular, and many times it is automatically included in the policy. Keeping the insured healthy has also become a goal of the insurance companies to help reduce their long-term costs. Some examples of preventative care benefits include routine physicals, mammograms, PAP and PSA tests, and child immunizations. Best of all, most plans will pay for these costs (up to a limited dollar amount) regardless of deductibles and co-insurance.
For example, if your health plan has a $1,500.00 annual deductible and the plan benefits are paid on an 80% / 20% basis, you might think all your preventative care would probably be paid out-of-pocket by you because they will get applied to your annual deductible. However, the insurance carrier usually sets aside the deductible and then pays 80% of the cost (up to a certain dollar amount). This substantially reduces your cost for preventative care and is the reason why many individuals with high deductible policies can benefit from this type of plan.
Most people in the United States still get their health insurance coverage through employer-sponsored policies. These plans are highly regulated and include some very unique features that differentiate them from Health Insurance purchased directly by individuals. The most significant financial difference is that employers are mandated to pay a portion of the cost for their employees’ health insurance premiums. Only the balance of the premium is paid by the employee through a payroll deduction.
When shopping for an Individual Health Insurance policy, you will be responsible for paying thefull premium cost. Since you are buying the plan on your own, there is no employer to help shoulder the expense. Studies have shown that employers, on average, pick up 75% (or more) of their employees’ health insurance premiums. Although the full cost (both the employer and employee amounts) of your employer-sponsored plan may be more than the individual health insurance plan you have selected, it is really your employer’s contribution toward the premiums that makes the health plan at your last job look so much more affordable.
When most people go to work at a company, they can usually choose between a few different employer-sponsored health insurance plans. These plans have been designed for this specific employer and the employee has little choice in altering the terms of the policy. When you apply for an individual health insurance policy, many of the benefit choices can be customized to fit your budget and lifestyle.
In addition to having the ability to modify your plan’s benefits, employer-sponsored plans can sometimes have a lot more regulation that governs the benefit terms. For example, in most employer-sponsored plans, maternity coverage is mandatory. In most individual health insurance plans, this is an option that must be added to the benefits. To ensure you get the coverage you need, make sure you fully understand the benefit terms, limitations and exclusions of your individual health insurance plan.