What is a Health Insurance Deductible?

If you are buying insurance for the first time, there is a lot to learn about how a medical plan functions.  One of the things you will want to understand is how a health insurance deductible works.

Fundamentals of Insurance

To understand how a health insurance deductible works in a health insurance plan, it is important to understand a basic principle of insurance.  Instead of a person taking the chance of financial loss due to an unforeseen event, that person can pay a price (called a premium) to an insurance company, and an insurance company will accept the risk of the financial loss.  The greater the risk of loss, the greater the premium.

One way to lower the premium is to take on more risk of the loss for yourself.  A typical method employed to do this is to implement a deductible.

So What is a Health Insurance Deductible?

A deductible is a flat dollar amount that a policyholder pays before the insurance plan pays any claims.  For example, if you have a $1,000 deductible, and your medical claims are $5,000, you will pay the first $1,000, and the insurance plan will pay the last $4,000 (assuming no coinsurance).

What if you have a medical claim of just $400?  Well, you will pay $400, and on your next medical claim you will be responsible for the first $600 ($1,000 deductible minus the $400 you paid earlier).

Is Everything Subject to a Deductible?

It depends on the plan that you have.  A typical major medical plan utilizes copays for things like office visits to primary care doctors, specialists, and the emergency room.  If you pay a copay for these visits, you usually will not be required to pay your deductible on top of this (some plans do actually require a copay plus a deductible for emergency room visits).

Plans that are labeled “High Deductible Health Plans,” or HDHPs, usually require all claims to be applied to the deductible before the insurance company will pay for any claims.  This means that the policyholder will pay the full cost of medical services and prescriptions until the health insurance deductible is met.

How Can I Know What is Subject to My Deductible?

Make sure to carefully read the benefit summary of any medical plan you are thinking about enrolling in.  The Patient Protection and Affordable Care Act (PPACA), more commonly referred to as Obamacare, requires insurance companies and group plans to provide a Summary of Benefits and Coverage (SBC) for medical insurance plans.

SBCs are designed to succinctly display the benefits that a medical plan provides.  The language is easy to read, and an SBC makes it easier to compare benefits between multiple plans on an apples-to-apples basis.  This will be the best way to find out what is subject to your health insurance deductible.

How Do I Know What Deductible is Best for Me?

That really depends on the amount of risk you are willing to take.  A low deductible will require more money paid in premium.  A high deductible means lower premiums.  If you do not want to take the chance of paying a lot of money out of pocket if you need medical services, then you’ll want a lower deductible.  Just know that you’ll be paying more in premium.

A high health insurance deductible requires you to pay more money up front if you get sick, but it also lowers your premium and gives you more money to use for other living expenses.

Are You Getting The Best Deal With Your Deductible?

The last thing any of us want to do is find out we’re paying too much for a deductible that is way too high. Does that sound like you?

Fortunately, we have access to hundreds of plans and can narrow your choices down to the ones that make the most sense for your family.

All you have to do is visit this link  —->>>> Affordable health insurance

Once there you can find the best insurance plans at the best prices available.

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What is a Family Out of Pocket Maximum in a Health Insurance Plan?

When purchasing health insurance for the first time, there is much to learn about how a medical plan functions.  If you are responsible for the insurance of your family, one of the things you will want to understand is what is meant by an out of pocket maximum, specifically a family out of pocket maximum.

Fundamentals of Insurance

To get an idea of how a family out of pocket maximum works in a health insurance plan, you must understand this one basic principle of insurance: instead of a policyholder assuming the risk of financial loss due to an unforeseen event, that person can pay a price (called a premium) to an insurance company, and the insurance company will accept some of the risk of the loss.  The greater the risk of loss for the insurance company, the greater the premium.

The easiest way to lower the premium is to take on more risk of the loss for yourself.  A typical method employed to do this is to increase a policy’s out of pocket maximum.

So What is a Family Out of Pocket Maximum?

An out of pocket maximum is exactly what it sounds like.  It is the maximum amount of money that you are required to pay out of pocket for medical expenses during the year.  In the past, it was up to the medical plan to determine what all was included in the out of pocket maximum, but under the Patient Protection and Affordable Care Act (PPACA), commonly referred to as Obamacare, all expenses (deductible, coinsurance, copays) will count towards the out of pocket maximum.

The family out of pocket maximum is the maximum amount that an entire family unit on a health insurance plan will be responsible for.  This can be just two people (spouses, an adult plus one child, etc.) or up to as many people are in the family unit.  An individual out of pocket maximum is the most that one person will be responsible for.

So lets say that a policy’s individual out of pocket maximum is $1,000, and the family out of pocket maximum is $3,000.  If a family has a mom, dad, and 3 kids, then the most they all will pay together is $3,000.  If mom pays $800, dad pays $500, kid 1 pays $900, kid 2 pays $400, then the four of them together total $2,600.  That means that the family will only be responsible for $400 of medical expenses for kid 3.  Even if kid 3 gets extremely sick and is in the hospital for 3 weeks, the family will only pay $400.  The insurance plan will pick up the rest.

Does Everything Count Toward an Out of Pocket Maximum?

As mentioned above, PPACA requires all out of pocket expenses paid to medical service providers count toward the out of pocket maximum.

One thing that is not counted toward the out of pocket maximum is the premium paid to purchase the medical insurance plan, except for Medicaid and CHIP premiums.

How Can I Find Out More About the Family Out of Pocket Maximum?

Make sure to carefully read the benefit summary of an insurance plan you are considering subscribing to.  The Affordable Care Act requires medical insurance companies and group plans to provide a Summary of Benefits and Coverage (SBC) for all plans.

SBCs are required to succinctly display the benefits that a health insurance plan provides.  The language should be easy to read, and an SBC makes it easier to compare benefits between multiple plans on an apples-to-apples basis.

How Do I Know What Out of Pocket Maximum is Right for My Family?

That really depends on the amount of risk you are willing to take.  A low out of pocket maximum will require more money paid in premium.  A high out of pocket maximum means lower premiums.  If you do not want to take the chance of paying a lot of money out of pocket if your family needs medical services, then you’ll want a lower out of pocket maximum.  Just know that you’ll be paying more in premium.

To find the current family out of pocket maximum, visit the IRS website.

Are You Getting The Best Deal With Your Family Out of Pocket Maximum?

The last thing any of us want to do is find out we’re paying too much for a family out of pocket maximum that is way too high. Does that sound like you?

Fortunately, we have access to hundreds of plans and can narrow your choices down to the ones that make the most sense for your family.

All you have to do is visit this link  —->>>> Affordable health insurance

Once there you can find the best insurance plans at the best prices available.

 

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What is a Copay?

What is a copay?  If you find yourself purchasing medical insurance for the first time, you need to find an answer to this question.  It is fundamental to understand how a copay works and what services it covers.

Insurance Fundamentals

To understand how a copay works in a medical plan, it is important to understand a basic principle of insurance: instead of an individual risking the chance of financial loss due to an unforeseen event, he or she can pay a price (called a premium) to an insurance company, and that insurance company will assume the risk of the financial loss.  The greater the risk of loss, the greater the premium.

One way to lower the premium of a health insurance plan is to take on some risk of the loss for yourself.  One way to accomplish this is by implementing copays.

So What Exactly is a Copay?

A copay is a flat dollar amount in a health insurance plan that a policyholder pays per event, such as visiting the doctor or filling a prescription.  Once the copay is paid, the insurance company (usually) pays the remaining cost of the claim.

A copay is different from a deductible by the fact that a copay is per event, while a deductible is a flat dollar amount paid just one time during the year.

Is Everything Subject to a Copay?

It depends on the health insurance plan that you have.  A typical major medical plan utilizes copays for things like office visits to primary care doctors, specialists, and the emergency room.  If you pay a copay for these visits, you usually will not be required to pay anything else, although some plans do require you to pay your deductible and/or coinsurance after you pay your copay.

The Patient Protection and Affordable Care Act (PPACA), more commonly referred to as Obamacare, sets a limit on the out of pocket expenses one person can incur.  Copays are counted toward this limit.  Once the limit has been reached, you will no longer be required to pay a copay during that year.

How Can I Know What is Subject to a Copay in My Medical Plan?

Carefully inspect the benefit summary of any medical plan you are thinking about enrolling in.  PPACA  requires insurance companies and group plans to provide a Summary of Benefits and Coverage (SBC) for medical insurance plans.

SBCs are designed to succinctly display the benefits provided by a medical insurance plan.  The SBC makes it easier to compare benefits between multiple plans on an apples-to-apples basis in plain language.

How Can I Know What Copay Level is Best for Me?

That really depends on the amount of risk you are willing to take.  Lower copays will require a higher premium.  For lower premiums, choose a plan that asks you to pay higher copays.

So what is a copay?  A copay is a flat dollar amount you pay for each applicable medical service.

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How to Calculate My Health Insurance Out of Pocket Expenses





One of the more daunting tasks associated with a medical insurance plan is keeping up with and calculating your out of pocket expenses.  This can be an especially worrisome task if you are new to the insurance game.  But take heart, it is not as difficult as it seems.

First a Word About Doctor Bills

Before you even begin paying doctor bills it is important to know what you are expected to pay.  If you have an insurance plan, and you have a medical service done at a doctor’s office or hospital (known as providers) that is in your insurance plan’s network, you will rarely pay the charge that the provider bills.  After your service the provider will file the claim and the insurance company will typically apply a discount to the charge.  This discounted rate is what the provider is allowed to be paid.  Therefore, if you get a bill from your doctor or hospital, do not pay anything if the claim has not been run through the insurance company.

What You’ll Need to Know In Order to Figure Your Out of Pocket Expenses

Before you can calculate the amount of money you owe in out of pocket expenses, you’ll need to know these four things.

  1. Your copays
  2. Your coinsurance
  3. Your deductible
  4. Your out-of-pocket maximum

You can get these from your plan’s benefit summary or your Summary of Benefits and Coverage.

Plans can vary of course, but most major medical plans make the policyholder pay a copay first, then deductible, and then coinsurance.  The total amount due cannot exceed the out of pocket maximum.

Plan Design Assumptions

For this discussion, lets assume that you have a plan design with the following benefit schedule.  We’ll also assume that the scenarios presented are the first medical services performed in the year.

Deductible – $1,000

Coinsurance – 90% (what the plan pays; you pay 10%)

Inpatient Hospital Copay – $250

Outpatient Hospital Copay – $0

Out of Pocket Maximum – $4,000


Scenario 1

You have a minor surgery in an outpatient center.  After network discounts (see above) are applied, the total amount due is $3,000.

  • Since this is an outpatient service, there is no copay.
  • Next, your deductible is due.  Since your deductible is less than the amount due, you will owe the entire deductible of $1,000. This leaves $2,000 left to pay.
  • You then owe your coinsurance, which means you will pay 10% of the remaining $2,000, which equates to $200.

Therefore, you owe $1,200 in out of pocket expenses ($1,000 deductible + $200 coinsurance) for this medical service.  The medical plan pays $1,800.

Scenario 2

Same as Scenario 1 except that the service is performed in an inpatient facility.  Total amount due is still $3,000.

  • Since this is an inpatient service, you owe a copay off the bat of $250.  The remaining balance is $2,750.
  • Your deductible is due next. You owe $1,000.  The remaining balance is $1,750.
  • You owe coinsurance next.  10% of the remaining balance of $1,750 is $175.

Therefore, you owe $1,425 in out of pocket expenses ($250 copay + $1,000 deductible + $175 coinsurance) for this inpatient medical service.  The medical plan pays $1,575.

Scenario 3

This time you have a serious illness that requires a lengthy inpatient hospital stay.  After the network discounts are applied, the total amount due is $100,000.

  • Since this is an inpatient service, you owe a copay of $250.  The remaining balance is $99,750.
  • You pay your deductible next.  You owe $1,000.  The remaining balance is $98,750.
  • Finally, your coinsurance needs to be paid.  10% of the remaining balance is $9,875.

So you’ll see that the amount due by you is $11,125.  However, you’ll notice that this amount is more than your plan’s out of pocket maximum of $4,000.  Therefore, you will only be required to pay $2,750 in coinsurance ($250 copay + $1,000 deductible + $2,750 coinsurance = $4,000 in out of pocket expenses).

Seems like a lot of money, and to most of us it is, but it is important to remember that for $100,000 of medical services, you only had to pay 4% of that amount.

 

Other Things to Note

The scenarios presented above are simple versions.  When you have a major illness or procedure, you will get probably get bills from several different providers.  Still, the method to determining your out of pocket expenses is the same.  Just make sure you keep track of all the money due.

Also, remember that for plans with networks, there are different deductibles, coinsurance percentages, copays, and out of pocket maximums for services provided in-network and out-of-network.

If you find yourself having trouble keeping track of your out of pocket expenses, remember most health plans have online tools and apps that keep everything organized for you.  It takes some work keeping up with your health insurance out of pocket expenses, but it can be done.



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Aggregate vs. Embedded Deductible – What is the Difference?

When you are deciding on a health insurance plan to buy, it is vitally important to have an understanding of the plan options available to you and your family.  One of those options is your deductible.  The deductible is the amount of money you will pay out of pocket before the insurance company begins to make any payments.  In general, a medical insurance deductible works the same way as the deductible for your car or home.  When there is a claim, you pay first, and the insurance company pays second.  If you have a larger deductible, you have a smaller premium.

The deductible is the amount of money you will pay out of pocket before the insurance company begins to make any payments.

Individual vs. Family Deductible

With health insurance, though, there is a wrinkle.  It is called the family deductible.  Most insurance plans will have a deductible for each individual and a second deductible for the family.  Once a family reaches that family deductible the plan will begin to pay all or some of a claim.  How that family deductible is calculated and applied is what causes the difference between an embedded deductible and an aggregate deductible.  Knowing which kind of deductible your plan has can save a lot of headaches and help you plan for medical services.


What is an Embedded Deductible?

An embedded deductible is when the plan begins to make payments as soon as one member of the family has reached the individual deductible limit.  For example, if the individual deductible is $1,000 and the family deductible is $3,000 and one member of your family has an orthopedic procedure that costs $5,000, your family will be responsible for $1,000 and the insurance company will be responsible for $4,000 (assuming no coinsurance, which will be the assumption throughout this article).  There will also be $2,000 left over in the family deductible, so if someone else in your family needs health care services, you will be paying a deductible for those needs.

What is an Aggregate Deductible?

With an aggregate family deductible, your family will be paying the deductible until the entire family deductible is collected.  This kind of deductible can be because of medical care to one person or the entire family.

For example, lets say your family of 5 has an aggregate deductible of $3,000 and one member of your family has that same $5,000 procedure.  Your family will be responsible for $3,000, and the insurance company will pick up $2,000.  Your deductible will be satisfied.

Now, lets say that you have a procedure that costs $1,200.  You will be responsible for the entire $1,200, and $1,800 worth of deductible will be left to be paid.  Next, your spouse has a procedure that costs $1,500.  Again, you will be responsible for the entire $1,500, and $300 worth of deductible will be left to be paid.  Later, your child has a procedure that cost $6,000.  You will only be responsible for $300 of the deductible, and the insurance company will pay for the rest.  If anyone else in your family has medical services in the year that are subject to the deductible, you will not pay anything since your family deductible has been met.

How To Know Which Deductible You Have

If you are not sure if you have an aggregate or embedded deductible, call your insurance plan’s customer service line, ask your benefits representative at work if you are on an employer plan, or check out your Summary of Benefits and Coverage.

You can also lower your out-of-pocket costs by enrolling in a telemedicine program, where you can talk to a doctor anywhere, anytime, 24/7. These calls are usually at a much lower cost than a visit to your doctor, especially if you are on an HSA-eligible plan.

Once you know if you have an embedded deductible or an aggregate deductible you can more easily plan your purchase of a health insurance plan and the payments of health care services.

Where To Find Great Deductibles That Fit Your Budget

The hardest thing to figure out when you are purchasing health insurance is if your plan is appropriate for your situation and if it is priced right. Fortunately, there is an easy solution. Simply fill in this quick form to be taken to every plan available in your area. It only takes a second…




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Now that you know the difference between an aggregate deductible and an embedded deductible, you’ll be set to make the best decision for you and your family!




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