It is important to understand how your health care plan operates, but far too often the tricky benefit jargon of “deductible, coinsurance, copay, and out-of-pocket max” get in the way. These hard to understand health care vocabulary terms are explained below to help make understanding your health care plan much simpler!
- Jace Estremera Week 13 Assignment April 10, 2021 Features of Health Insurance Plans Copays and deductibles are features of health insurance plans. They involve payment on the part of the insured, but the amount and frequency differ. A copay, short for copayment, is a fixed amount a healthcare beneficiary pays for covered medical services (O’Sullivan et.
- Copayment/coinsurance in drug plans. These are the amounts you pay for your covered drugs after the Deductible (if the plan has one). You pay your share and your plan pays its share for covered drugs. If you pay Coinsurance, these amounts may vary throughout the year due to changes in the drug’s total cost. The amount you pay will also depend on the Tiers level assigned to your drug.
While copay, deductible and coinsurance are cost-sharing terms, their applicability can make a huge difference to your overall health insurance plan. Deductibles and coinsurance are clauses that are mostly implemented together under one single insurance plan. The Part A inpatient hospital deductible covers beneficiaries’ share of costs for the first 60 days of Medicare-covered inpatient hospital care in a benefit period. In 2021, beneficiaries must pay a coinsurance amount of $371 per day for the 61 st through 90 th day of a hospitalization ($352 in 2020) in a benefit period and $742 per day for lifetime reserve days ($704 in 2020).
Deductible – the amount of out-of-pocket expenses you pay for covered health care services before the insurance plan begins to pay.
| HSA-Eligible Plan | All covered services require you to meet your deductible first and then services will be covered through coinsurance. |
| PPO Plan | Some covered services require you to meet the deductible first, while other covered services are paid with a copay. |
| Helpful Hint! | The health plan comparison chart shows deductible amounts for Tier 1, Tier 2 and Tier 3, but you should think of your deductible as one sum of the money you have paid for your services. |
| Example | With a $1500 Tier 1 deductible on the HSA-Eligible Plan with single coverage, you pay the first $1500 of covered services yourself. If you have met this, you would pay an additional $100 towards your services and then would have met the Tier 2 deductible of $2,500. |
Coinsurance – the percentage of cost of a covered health care service you pay once you have met your deductible.
| HSA-Eligible and PPO Plans | For services covered by “coinsurance after deductible” the amount you pay in co-insurance continues to count towards meeting your next Tier deductible. |
| Coinsurance % | Most Tier 1 services are covered at “90% coinsurance after deductible,” while Tier 2 services are “75% after deductible and Tier 3 are “60% after deductible.” |
| Example | If you are on either plan and have hit your Tier 1 deductible and visit a Tier 1 urgent care provider, the plan covers that service at “90% coinsurance after deductible.” This means you will pay 10% of the cost of the visit and your insurance will cover the remaining 90%. The 10% you pay will count towards your deductible. |
Copay – a fixed dollar amount you must pay to a provider at the time services are received.
| PPO Plan | Only the PPO Plan offers a copay option for specific covered services. Your copay does not count towards your deductible. |
| Copay Amounts | Copay amounts vary based on the plan design. The health plan comparison chart is the best resource to understand what your copay is for a covered service within any of the tiers. |
| Example | If you are on the PPO plan and you see a Tier 1 provider for a standard sick visit, then your copay at the time of the visit will be $20. If you seek a Tier 1 provider for physical therapy, then your copay will be $35. |
Out-of-Pocket Max – the maximum amount you pay each calendar year to receive covered services after you meet your deductible. Once you meet your out-of-pocket maximum, the Plan pays 100% of covered services you receive. In network and out-of-network services are subject to separate out-of-pocket maximums.
| HSA-Eligible and PPO Plans | Your out-of-pocket max is the summation of everything you have paid for your medical services received; this includes deductible, coinsurance and copay. |
| Helpful Hint! | Out-of-pocket max’s are determined by coverage level (single vs plan with dependents) and salary. On the health plan comparison chart you will see multiple rows with Out-of-Pocket Max figures, so be sure to look in the row that pertains to your situation. |
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Whether you get health insurance through your job, directly from an insurance company or through the Healthcare.gov marketplace, you may have the option to choose a high deductible health plan (HDHP). A deductible is the amount you must pay out of pocket for health care before your insurance coverage kicks in—an HDHP sets this number higher than typical health plans (and meets other criteria set by the IRS).
An HDHP could reduce your health care costs thanks to lower premiums, but there are factors to consider.
How Does a High Deductible Health Plan Work?
You pay a monthly premium for health insurance whether you use the plan or not. When you receive health care and file an insurance claim, insurance pays part or all of the bill if the care is covered under your plan. Most plans also have an annual deductible amount you'll have to cover on your own before insurance begins to cover your costs.
Even if your plan's deductible seems high to you, it must meet standards set by the IRS to qualify as a true HDHP. In 2021, an HDHP is one with a deductible of $1,400 or more for an individual and $2,800 or more for a family, and an out-of-pocket maximum (the amount you must pay out of pocket for care, including the annual deductible) of $7,000 for an individual and $14,000 for a family. The plan must also pay for non-preventive care only after you've met your deductible.
Most health insurance plans cover preventive care without requiring you meet your deductible first. If you have an HDHP with a $1,400 deductible, you'll pay for any non-preventive care until you've paid $1,400. After that, your insurance pays for care, although you may still have a copay (a flat fee for visiting a provider or filling a prescription) or coinsurance (a percentage of medical costs you pay after meeting your deductible).
The rules for HDHPs are complex. If you're not sure a plan meets the definition, go over your insurance information, contact your insurer or see if it qualifies you for a health savings account (HSA)—only HDHPs qualify for these accounts.
Pros and Cons of a High Deductible Health Plan
High deductible health plans have some key benefits:
- Potentially lower premiums: HDHPs typically have lower premiums than non-HDHPs. The tradeoff: potentially higher out-of-pocket costs when you do file an insurance claim.
- Tax-free spending account: Only HDHP participants qualify for HSAs to save money tax-free for qualified health care costs. HSAs offer many tax advantages and can even help you save for retirement.
Copay And Deductible Difference
HDHPs also have downsides:
- Higher deductible: You must pay your full deductible before any non-preventive care is covered.
- Potentially high out-of-pocket expenses: HDHPs have high out-of-pocket maximums, so you'll shoulder more of your medical costs than if your plan had lower maximums.
However, some plans have lower premiums or higher out-of-pocket maximums than HDHPs. The out-of-pocket maximums for non-HDHP plans that conform to Affordable Care Act regulations are $8,550 for individuals and $17,100 for families—higher than the HDHP maximum. Since higher maximum limits generally mean lower premiums, you may find non-HDHP plans with lower premiums than HDHPs.
How to Decide if a High Deductible Health Plan Is Right for You
Copay And Deductible Means
HDHPs can make sense for people on either end of the health care need spectrum.
If you're young and healthy, you might only use preventive care, which HDHPs cover before you've met your deductible. Non-HDHPs do this too, but the list of services qualifying as 'preventive care' for HDHPs is longer, so an HDHP may cover care you'd have to pay for with a non-HDHP. In addition, non-HDHPs often require copays for preventive care before you meet your deductible, but HDHPs cannot charge copays until your deductible is met—so preventive medical care and prescriptions preventive are 100% covered.
Conversely, if you expect high medical expenses in a certain year, an HDHP might make sense. HDHPs may have lower maximum out-of-pocket costs than some non-HDHPs. And once you've met your deductible, many HDHPs cover 100% of your care. With non-HDHPs, you'll typically still have copays or coinsurance. Open an HSA for your HDHP and pay qualified expenses with pretax money to save even more.
When buying health insurance, there are four types of plans to choose from: health maintenance organization plans (HMO), exclusive provider organization plans (EPO); point-of-service (POS) plans and preferred provider organization plans (PPO). Each type of plan has a network of preferred health care providers. Use doctors within the network and pay less for care; use providers outside the network and receive lower or no benefits.
To select the best insurance plan, consider premiums; out-of-pocket costs including the deductible, coinsurance and copays; and out-of-pocket maximums. See if your doctors are in the insurance plan's network and if your current prescriptions are covered.
How to Save Money on Health Insurance
There are several strategies you can employ to reduce your health insurance costs. Here are a few:
- Use an employer's health insurance plan if offered. Getting insurance through your employer or your spouse's employer is generally cheaper than buying your own.
- Stay in network for your medical care. You'll typically pay more for using an out-of-network provider; some plans won't pay for them at all. In addition, an HDHP's out-of-pocket maximum limit only applies to in-network care.
- Know how your plan works. For example, you may need preapproval for certain procedures or a referral to see a specialist. Fail to follow the rules, and your plan may not pay.
- Set up an HSA and set aside pretax income you can then use for qualified health care costs, including copayments, coinsurance, prescriptions and medical procedures. Some employers offer HSAs, or you can open one yourself.
- Ask about tax-advantaged employer plans. Some employers offer health reimbursement arrangements (HRAs) or flexible spending accounts (FSAs), which are tax-advantaged ways to pay qualifying medical costs. They work slightly differently: An FSA is funded by pretax contributions you make, while your employer funds an HRA for you (you cannot contribute) and you withdraw money tax-free. Both types of accounts are owned by your employer, so if you leave your job, you'll lose the funds.
Choose the Right Health Insurance
Copay Deductible And Coinsurance
Although health insurance can be costly, it protects against potentially catastrophic medical expenses. Without insurance, health issues could mean medical debt that can make it harder to manage your financial obligations and potentially hurt your credit score. Your deductible is just one aspect of the big picture, but it's an important consideration in choosing the right plan for you.