Do You Know How the Costs Of Your Medical Insurance Plan Are Calculated?
Unless you are familiar with medical insurance then the costs of a medical insurance plan could appear to be a little bit complex and many people are surprised that, having shelled out what seems like an arm and a leg, they find themselves faced with a bill the very first time that they make a claim. So before you are landed with a substantial medical bill therefore, it might be a good idea to take a moment to learn just what goes to make up health insurance plan costs.
The first and probably most obvious cost is the monthly premium or, in some cases, the quarterly premium or annual premium. If you are enrolled in an employer’s or union group insurance plan then you will normally be required to meet only a percentage of the premium and this will often be deducted from your pay check.
The majority of health insurance policies also include an annual deductible which is a sum of money that you will need to pay before the insurance company begins to pay out on any claims. Thus, with an annual deductible of $1,000 you will need to meet the first $1,000 of your medical bills every year before the insurance company will start paying out. You might be familiar with paying a deductible from your experience with car insurance policies and, if this is the case, will know that the more the deductible on your policy the lower your premiums will be. Also, if you have a family health policy then this will often include deductibles for each family member covered by the policy.
The majority of health plans will also include a co-payment which is a fixed amount of money that you will need to pay towards each medical bill. Exactly how much you will have to pay in co-payments will depend to a large extent on the type of plan which you hold. For instance, co-payments on HMO plans are generally lower than those on indemnity plans. In addition, the co-payment will also vary between different forms of medical service and, if you are a member of an HMO plan, will generally rise if you seek treatment outside of the HMO network.
In those cases where no co-payment is required you will generally find that this is replaced by co-insurance which is very similar and is a sum of money, in this case expressed as a percentage, which you will once again need to pay towards each medical bill. A common co-insurance ratio is 80/20 which means that the insurance company will pay 80% of any medical bill while you pay 20%. As in the case of co-payments, co-insurance will generally increase if, as an HMO plan member, you seek treatment outside of the HMO’s network. In this event you will also find that, when a claim exceeds what the insurance company considers to be ‘reasonable and customary’, you might be required to pay the additional cost.
By this time you will see that comparing health plans is about much more than merely comparing premiums. As a consequence, it is critically important that you read the details of any health insurance quote most carefully and that you avoid the frequent temptation to simply select the plan which has the lowest monthly premium.
If you want to keep costs low and are a member of an HMO plan then you should attempt to stay within the HMO’s network and, if you do feel that it is necessary to go outside the HMO’s network, then compare actual treatment costs to what your insurer considers to be ‘reasonable and customary’ before undergoing treatment.
It is also possible to keep your costs down on most plans by raising or lowering the deductible and by selecting higher or lower co-insurance. Just how this can be achieved is beyond the scope of this particular article but is a matter of balancing the different costs against the probability of needing to make a claim on the plan.
This may seem a little complicated but an understanding of the different costs that make up your total expenditure is extremely important when it comes to getting a good deal and finding the best private health insurance plan.
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