Understanding Health Insurance
Figuring out your health insurance can be tricky. That’s why it’s important to learn and understand the basics of your health care coverage and what you can expect. Below are a few things you should know to help get you started.
Private insurance, sometimes called commercial insurance, is a type of health insurance that covers medical expenses and disability income for the insured patient. These types of insurance plans are available individually or as a group policy and differ from plan to plan.
People who do not have health insurance are considered uninsured, or cash-paying, patients. Uninsured patients pay directly for their health care without going through an insurance provider or government agency.
Government health insurance is health coverage provided by a federal or state agency. Examples of government insurance include Medicare, Medicaid, TRICARE, US Department of Veterans Affairs health care, and US Department of Defense health care.
A deductible is the amount of money that you are responsible for paying before your health insurance plan starts to pay for covered medical services. For example: If you choose an insurance plan with a $2000 deductible, you must pay the first $2000 of your medical expenses per year before your insurance company provides any payment. Then, after you’ve met your deductible, you will typically be required to pay a co-pay or coinsurance for services covered by your insurance plan.
A co-payment, also called a co-pay, is the set amount you pay each time you visit the doctor or get a prescription medication filled. For example, your insurance plan may require you to pay a $15 co-pay for doctor office visits and a $10 co-pay for prescriptions up to a specified covered amount. Co-pay costs may vary depending on the type of medication or type of doctor you see.
Most Medicare Part D prescription drug plans come with a coverage gap, also known as a "donut hole". The donut hole comes into effect after you and your drug plan have spent a specified amount of money on covered drugs. Once that limit has been reached, you are responsible for paying all out-of-pocket costs for your prescriptions until you reach the catastrophic coverage phase.
Patients with Medicare who have moved out of the donut hole phase will automatically move into the "catastrophic coverage" phase. Catastrophic insurance allows patients to pay a smaller coinsurance amount or co-payment for covered drugs for the remainder of the year.
Out-of-pocket costs refer to the health care expenses you are responsible for paying that aren’t reimbursed by your insurance provider. These expenses include payments for services that aren’t covered by your insurance plan, as well as co-pays, coinsurance, and deductibles for services that are covered.
Coinsurance is the percentage of costs of covered medical expenses that you are responsible for paying, after you’ve paid your deductible. These percentages may be different depending on your insurance plan, and some plans may not have coinsurance at all.
For example, if you get a medical procedure that costs $100 and your coinsurance is 20%, then:
- Once you’ve met your deductible, you would pay 20% of $100 (which is $20)
- Your insurance provider would pay for the rest (which is $80)
Most private or commercial insurance plans come with an out-of-pocket maximum. The out-of-pocket maximum refers to the greatest amount of money you will have to pay for covered medical expenses in one plan year. Once you have spent this much on deductibles, coinsurance, and co-pays, your insurance provider will begin to pay 100% of your covered medical expenses. Note that your out-of-pocket maximum does not include your premium payments or services your plan does not cover.
For example, let’s say you have an out-of-pocket maximum of $5000. If you have a medical procedure that is covered by your plan and costs $10,000, then:
- The most you should be responsible for paying is $5000
- Your insurance company should cover the rest of the costs
A premium is the set amount of money you pay in order to receive health insurance. This amount does not include other costs you will have to pay for the health care services you receive, such as co-pays, coinsurance, and deductibles.