How do I predict extra costs for health care?
Why would I have to pay anything if I pay a premium for a really good insurance plan already? What would I have to pay and how can I predict the amount I will need?
Well, the short answer is that we have to pay certain portions of costs because this is the way the system works. Health insurance coverage includes provisions for sharing the costs of medical care. Cost sharing means that both you and the health insurance company (sometimes the government) make payments towards health care costs. You pay monthly insurance policy premiums in order to be covered by the insurance, and you also pay a small portion of the cost when you see a doctor, get a treatment, or fill a prescription. The insurance company (or the government) pays their covered portion of the cost directly to the provider or facility.
Cost-sharing helps consumers to make smart choices about what medical care we seek. Imagine if we didn’t need to pay any part of the cost: we would be heading off to the doctor for every little sneeze, and asking for more tests and treatments than really needed. We would overload the system. In addition, the law of supply and demand would kick in: high demand would lead to increasing prices for health care and therefore to rising insurance costs. Having co-pays and deductibles actually benefits consumers by keeping costs in check.
Consumer costs for health care generally fall into these categories:
Premium: The amount that must be paid for your insurance policy, usually monthly. Premiums must be paid steadily to maintain coverage, regardless of whether you receive any medical care. All costs listed below are in addition to the monthly premium.
Deductible: An amount that you may need to pay out of pocket for the first expenses incurred in each year that you are covered by the insurance policy. Deductibles can range from zero to several thousand dollars. For example, if you have a $250 deductible, then you will pay the first $250 of medical expenses incurred in a year; after that, your insurance plan will begin to help pay for your medical expenses. When choosing an insurance policy, you may have choices between plans that have lower or higher deductibles.
Co-pay (co-payment): Generally a small fixed amount ($20 - $75) which you pay at the time of service. Office visits, emergency room visits, and prescription drugs may require a co-pay.
Co-insurance: Your share of costs of a service covered by your insurance, often a percentage (%) of the total cost of the service. You are usually billed for this a few weeks after the service is provided; the provder will submit the claim to your insurance company to find out how much your plan will cover, and then will bill you for the remainder.
Some plans have what are called out of pocket limits for each year that you are covered by the policy. That specifies the maximum which you will need to pay during the year for services covered by your insurance plan. This is a good thing for you as you can know the maximum you will have to pay in a twelve month period for all deductibles, co-pays and co-insurance payments. When the total of all your out-of-pocket costs reaches that limit, you will no longer need to pay deductibles, co-pays and co-insurance on covered services for the remainder of the year.
Under the Affordable Care Act, many insurance plans now offer preventive services with no deductible, co-pay or co-insurance. That means insurance pays the full cost of preventive care at all times regardless of whether you have paid your deductible or reached an out of pocket limit.
Click here to see more information on premiums, co-pay, and out-of-pocket expenses.
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