Understanding Cost vs. Coverage

Balancing what you can afford and the health insurance coverage you need is the key to finding the right plan. To help you in your decision making process, here’s a look at the basics of health insurance costs and coverage.

Cost is more than what you pay every month for your health insurance. Factors that make up the cost of insurance include the following:

Deductible
The amount you pay before your health insurance plan begins to pay. Not all plans have a deductible.

For example, say you need surgery and your hospital bill is $10,000, and your annual deductible is $2,000. That means you have to pay the first $2,000 of your hospital bill. After your deductible is met, you may be responsible for a copay or coinsurance, but your insurance company will pay the remaining amount.
Copay
A fixed amount you pay at the time health care services are provided.

For example, your plan may require a $10 copay for a visit to your primary care doctor and a $20 copay to see a specialist. Not all plans have copays.

Coinsurance
A set percentage of your health care costs that you pay after your deductible is met and until you reach your out-of-pocket maximum.
For example, you may be required to pay 20% of a procedure’s cost and your plan pays the other 80%. Not all health insurance plans have coinsurance.

Premium
The amount you pay for an insurance policy.

How it works

Your premium + your deductible + copayments + coinsurance = the most you will pay for health care each year (for covered services). Here’s an example:  

Sample plan
  • Deductible: $1,500
  • Coinsurance: 20%
  • Out-of-pocket maximum: $5,000

How it works

1. In the example above, you would be responsible for paying for the first $1,500 of your covered medical or prescription drug expenses. This is your deductible.  

2. Once that’s paid, you would be responsible for 20% of your covered expenses. This is your coinsurance.

3. Once you hit the $5,000 out-of-pocket maximum, your insurance will pay for the rest of your covered expenses for the year.

You’ve probably heard the terms “in-network” and “out-of-network.” But what do these really mean? And how do they impact you?

In-network
In-network doctors, hospitals, facilities, etc., are health care providers who partner with your insurance company and charge you discounted fees.

How this impacts you: Make sure your preferred doctors (primary care and specialists), hospitals, and facilities are in-network. This way, you will be charged the discounted rate.

Out-of-network
With out-of-network health care providers, your insurance company doesn’t have a discounted rate. If you choose to visit those doctors, hospitals, and facilities, they can charge any amount.

How this impacts you
: You will likely pay higher out-of-pocket costs to visit out-of-network health care providers.

Not covered
Services that are not covered are those that your insurance plan will not pay for in any way. You will be required to pay 100% of the cost.

How this impacts you
: Before enrolling in a plan, check for services that are not covered. For example, if you are planning to have an elective procedure done and it is not covered in your plan, it will mean a higher cost for you.

Free services
Some services, such as preventive services, are covered in full by health insurance plans.

How this impacts you: Learn about the discounts, free services, and resources your plan comes with so that you can save money and achieve your health and wellness goals.

There are many things you can do to lower your health insurance costs, including:

  • Doing your research first to select the plan that works best for you and your family. That means choosing a plan that covers the services you know you’ll use. Even if it has a higher premium, it will save you money in the long run.
  • Taking good care of yourself, and maintaining a healthy lifestyle.
  • Using doctors, hospitals, and facilities within your network.
  • Getting a routine physical every year to stay on top of any health conditions.
  • Checking with your employer to see if they offer incentives for participating in wellness activities, such as getting a physical or quitting smoking.
  • Reviewing your “Explanation of Benefits” (EOB) each year to make sure you aren’t being charged for care you didn’t receive. (An EOB is a document or form sent to you by your insurance company explaining what medical treatment or services you received, how much they cost, payments made, and what amount, if any, you are responsible for.)
  • Taking advantage of discounts that your plan offers. For instance, some plans offer discounts for gym memberships and vitamins 
  • Seeing if you can save money on prescriptions by using a certain pharmacy or a mail-order pharmacy service. Be sure to also find out if there are generic versions of your prescriptions available.
  • Visiting your primary care doctor for non-emergencies, such as coughs, minor aches and pains, and low-grade fevers.

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