October 26, 2014

Common question: How do deductibles, co-insurance and out-of-pocket maximums work on my insurance plan?

These are three common items associated with most company insurance health plans. They are very important because these are the primary aspects that will determine the bulk of the cost employees and their families will incur when they go to their doctors and hospitals. Let’s take them one at a time.

Medical Deductible: This is the amount that a medical plan enrollee will have to pay for certain services first before the insurance begins to kick in. Usually a medical deductible will be a set amount between $500 and $2,000 per policy year for an individual. For families, the deductible will typically double. If a deductible is $500 for an individual, it will be $1,000 for a family and so on as deductibles increase. One thing companies ought to be wary of is what the deductible applies too. Some services will be subject to the medical deductible, others may not. Most often, medical deductibles will be associated with hospitalizations and surgeries. In some plans, the deductible may be extended to emergency room visits and doctors appointments.

Co-insurance: This is the thing that I always advise companies and individuals to look out for. This is the aspect of enrollee cost that can really ramp up those costs quickly. Co-insurance is a cost that will come into play after the medical deductible is satisfied. It is a percentage split that an enrollee will be responsible for after the medical deductible. Common co-insurance amounts on a plan will run at 10 or 20 percent, in some cases higher. In a nutshell, if a company has a $500 medical deductible and a 10% co-insurance model, the enrollee would first satisfy the medical deductible. From there, whatever is left on a medical bill after the first $500, the enrollee will be responsible for 10% of that number up to an out-of-pocket maximum.

Out Of Pocket Maximum: This will represent the most an enrollee will pay for any given policy year. As with the medical deductible, the out of pocket maximum will have one number for an individual out of pocket maximum and will typically double for a family. For example, a plan with a $2,000 out of pocket maximum for an individual will have a $4,000 out of pocket maximum for a family. Co-insurance features are the things that can bring the out-of-pocket maximums into play, when you have a percentage on a large medical bill, these limits have a habit of being reached.

My experience has taught me to advise avoiding plans with co-insurance when possible. With that said, different vendors in different states will have different plans. Sometimes cost simply won’t allow for a plan that doesn’t have it.

Make sure as both employers and employees, that everyone is aware of these three factors. These will determine the true costs of your plans in terms of monthly premiums and usage costs. The one thing no one likes is a surprise that hits them in the wallet.

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