Understanding your health insurance benefits can be confusing and overwhelming, especially when you are faced with a high-dollar medical bill. As your health insurance agent, we aim to simplify the process of buying health insurance and provide you with the resources and information you need to understand your benefits.
Have you ever been told that your doctor visit was applied to your deductible? Maybe you were told you have to pay until your out-of-pocket maximum has been met. Deductibles and out-of-pocket maximums are two parts of every insurance plan that many people do not understand. Let’s talk about what they are and how they work in your insurance plan.
Your deductible is the annual amount you must pay each year for specific non-copay health care services before your insurance begins to pay. For example, if you have a $2,000 deductible, you will pay $2,000 for health care services before your insurance kicks in. Generally, your deductible starts over every year in January, but you should check your specific plan to verify.
Once you meet your deductible, with the exception of copay services you will only pay co-insurance on eligible medical expenses until you reach your out-of-pocket maximum. With co-insurance, the health insurance company usually pays a majority of the cost of eligible medical expenses. A plan with 80 percent co-insurance, for example, means the health insurance company would pay 80 percent and you would pay the remaining 20 percent after your deductible is met. If you have copays for other services, these out-of-pocket costs would not be applied to your insurance deductible, but would be applied to your out-of-pocket maximum.
Your out-of-pocket maximum, on the other hand, acts as a safety net that is built into your health insurance policy to protect you from expensive medical bills that may threaten your financial security. The out-of-pocket maximum is the maximum amount of money you will spend on in-network medical expenses during the year. Your office visit, urgent care, and pharmacy expenses are some of the costs that will be applied to the out-of-pocket maximum. Additionally, the amount you pay to meet your deductible is applied to your out-of-pocket maximum. Your out-of-pocket generally restarts every year in January, just like the deductible. Check with your specific plan to verify.
Let’s say you have a traditional copay plan with the following benefits:
Deductible = $1,500 deductible
Co-insurance = 80 percent
Out-of-pocket maximum = $5,000
You have been told that you need to have a $15,000 surgery and you have chosen an in-network provider. You are responsible for the first $1,500 of medical expenses (your deductible) and then you would pay 20 percent (your co-insurance) of the remaining $3,500 until you meet your out-of-pocket maximum ($5,000).
Let’s break that down even further. The cost of surgery is $15,000. You pay the first $1,500 to meet your deductible, leaving $13,500 of the surgery left to cover. On that remaining $13,500, you pay the co-insurance amount (20 percent). 20 percent of $13,500 is $2,700. At that point, you have paid only $4,200 ($1,500 + $2,700) of the $15,000 surgery bill with insurance covering the remainder. You are then only responsible for up to $800 (to meet your out-of-pocket maximum of $5,000) in eligible medical expense for the remainder of the year. After that, insurance will cover 100 percent of eligible medical expenses.
TIP: It is important to understand how your plan works and you should always compare the bill you receive from your doctor to the Explanation of Benefits (EOB) that your insurance carrier sends you. The costs on both should match and, if they don’t, you should call your doctor and ask why. If you ever don’t understand your plan or you have questions on what is covered and how, there is always a phone number on your insurance card to get you to member services who can answer all of your questions.
Let’s take the guesswork out of your health insurance policy. Your friends at ARC Benefit Solutions are here to help guide you through the details of your plan and how they may benefit you. Contact us today and we will help simplify the complicated world of insurance.