What Does It All Mean?
Annual Deductible
Deductibles are a way for insurance companies to control and reduce risk by requiring the policy holder to have a financial investment in their healthcare as to reduce unnecessary care and services. The amount designated for you to pay as your annual deductible will vary by plan. The annual deductible is the amount of money you must pay out of pocket for healthcare services that have been designated as covered expenses before your plan begins to pay benefits for eligible expenses. In most cases, the higher your annual deductible, the lower your monthly premium. However, some plans may have medical underwriting qualifications, lowering the risk for the insurance company, and may provide low to no annual deductible as well as a low premium.
It is possible to have one deductible for eligible healthcare expenses and a separate deductible to be met for prescription drugs. Also, if you have family coverage, there may be a deductible per person or a cumulative family deductible.
Co-Payment
A co-payment are designated amounts that your are required to pay out of pocket for doctors visits, prescription drugs, or urgent care services and may or may not be applied to your annual deductible requirement. Your co-payment is paid at the counter of your medical facility prior to services being rendered by a physician.
Co-Insurance
Coinsurance is the amount you are required to pay out of pocket after you have met your annual deductible. For example, you may have a $8,000 annual deductible with 80/20 coinsurance with a $10,000 maximum out-of-pocket. This means that you have to meet $8,000 out of pocket for your annual deductible before your plan begins to pay toward covered expenses. Then, remaining expenses are covered at 80% by the insurance company and 20% by the policy holder until the policy holder reaches their $10,000 out-of-pocket maximum. Once the out-of-pocket maximum has been met, the insurance company will pay 100% of covered expenses.
Out-of-Pocket Maximum
The Out-of-Pocket Maximum within a Health Insurance policy is the limit a policy holder has to pay out of their own pocket each year for covered healthcare expenses. Having these limits is a safeguard for the policy holder to control risk by placing a cap on their share of healthcare costs. Once the policy holder meets the out-of-pocket maximum, the health insurance company pays 100% of the remaining expenses.
Keep in mind that costs that are not covered expenses per the explanation of benefits within your policy will not go toward the out-of-pocket maximum. Also, your monthly premiums will not be applied to your out-of-pocket maximum. Typically, deductibles, copayments and coinsurance will all be applied toward your out-of-pocket maximum.
