Health Insurance: Understanding Your Premium, Deductible, Co-pay, Co-insurance and Out-of-Pocket Maximum

Understanding health insurance can be difficult at times.  There are many terms used that most people have no idea what they mean - it's not your fault, it is "industry speak" and unless you find yourself immersed in this insurance stuff you really have no reason to know anything about what all of it means.

Now that we all are required to have health insurance, it is helpful if you have a general understanding of a few of the common terms found in almost all insurance plans.  I will try to explain five of them so you can understand any policy you are looking at or comparing to other plans:

• Premium: The monthly fee for your insurance.
• Deductible: How much you must kick in for care first, before your insurer pays.
• Co-pay: Your cost for routine services to which your deductible does not apply.
• Co-insurance: The percentage you must pay for care after you’ve met your deductible.
• Out-of-pocket maximum: The absolute max you’ll pay annually.

 Here are a few examples to help you understand even better:

• Premium is the amount you pay for the "privilege" of having a health insurance policy.  This amount can vary widely depending on your age, region, what plan you choose and what doctors are part of a network, etc.  For example, you might pay $250 per month for a high deductible bronze plan or $400 per month for a co-pay gold plan.
• Deductible is how much you have to pay per calendar year before any insurance kicks in.  For example, if your deductible is $6,000 on a bronze plan and you had to go the emergency room and you received a bill for $650, that amount would be your responsibility and that would count toward your deductible.  So $6,000 - $650 = $5,350 which is the balance of your deductible.
• Co-pay is a fixed dollar amount for a doctor visit or procedure.  For example, if your co-pay to see a primary care doctor or specialist is $40 then that would be your responsibility at the time of any visit.
• Co-insurance is similar to a co-pay, although co-insurance generally applies to major medical expenses, and is expressed as a percentage rather than a fixed dollar amount.  Co-insurance kicks in after you hit your deductible. If your plan has a $1000 deductible and 30% co-insurance and you use $2,000 in services, you’ll pay the $1000 plus 30% of the remaining $1000, up to your out-of-pocket maximum. There are plans with no co-insurance requirements, some with 20/80 or 40/60 coinsurance, or other combinations. 
• Out-of-pocket maximum is your maximum exposure.  For example, if your out-of-pocket max is $6500 and you are hospitalized for nine nights and your bill is $80,000, your responsibility is $6500 and the insurance pays the rest.

Having someone who can explain the differences in each plan can be very helpful for you.  A professional, licensed insurance agent can help you and it never costs you anything extra.  So reach out and get all your questions answered so you feel like you are making the best and wisest decision when it comes to your health insurance.