Health insurance helps you cover the cost of unexpected medical expenses. Its monthly premium and deductibles vary by state, age and plan category.
You also pay for care through copayments and coinsurance. These are flat dollar amounts or a percentage of the cost of care after you meet your plan’s deductible.
Premiums
There are a few key factors that determine how much health insurance premiums are. These include the type of plan, the deductible amount and the age of the insured. In addition, the size of an employer can affect the cost of a plan. Those who don’t get insurance through their employers can find affordable options on the marketplace. These plans are broken down into tiers, with bronze plans offering the lowest premiums and platinum plans offering the highest.
Depending on income, some people may qualify for subsidies to help reduce the cost of marketplace plans. This includes those who don’t use tobacco and have a family income below 400% of the federal poverty guideline. However, many individuals can’t afford the full price of marketplace plans and may need to consider a catastrophic plan, which has higher deductibles but lower premiums. Premiums are rising, but luckily, more people are qualifying for subsidies to pay for coverage.
Deductibles
A deductible is the amount you pay for health care costs each year before your insurance plan starts paying. For example, Ben’s family plan has a $2,000 annual deductible. He takes his 3-year-old to the emergency room after he falls off a slide at the park and breaks his arm. He pays the $1000 MRI deductible and then the health plan covers the surgery.
When comparing plans, consider the cost of the monthly premium as well as the annual deductible and copay/coinsurance. Then calculate the maximum amount you would be responsible for in a year, including the deductible and copay/coinsurance (but not the premium). This is called your annual out-of-pocket limit.
Some people like to have a lower monthly premium and a higher deductible so they know their healthcare costs will be less up front. However, it’s important to understand the total out-of-pocket cost of a plan before you sign up. You can find this information in your plan’s Summary of Benefits and Coverage.
Copays
A health insurance copay is a fixed amount you pay when visiting a doctor or getting a prescription. Most health insurance plans include a copay in their cost-sharing structures along with deductibles and coinsurance.
Health insurers have found that including copays in their cost-sharing structures saves them money. They are able to cut deals with doctors, medical groups and hospitals to bring down costs for their policyholders. Typically, these cost-sharing requirements do not count toward your annual deductible.
Leon, a forklift operator, and his wife Leah have an affordable family plan with $30 copays for visits to their primary care physicians and $50 copays for visits to specialists like an orthopedist. They also have to pay a lower copay when visiting an urgent care center than they would for the emergency room. Likewise, he pays a lower copay for name brand prescription medications than for generic ones. The difference in costs for each service is a result of his plan’s provider network rules.
Coinsurance
Coinsurance is a cost-sharing agreement between an insurance plan and the insured. It typically applies after the deductible is met, and it can be applied to office visits, procedures and medications. For example, a $20 copay may apply to visits with the primary care physician, while a 20% coinsurance rate may apply to prescription drugs and other expenses. Coinsurance payments count toward your out-of-pocket maximum, which is the amount you’re required to pay in a year before your insurance company starts paying 100% of covered costs.
Copays and deductibles are two of the most important factors in determining how much health insurance will cost you. Knowing the difference between these two terms can help you better understand your potential healthcare costs and how to shop for the best plan for your needs. The Cigna Healthcare video below can help you get a better understanding of these key terms.
