In almost any area of your life, if you don’t have a clear idea of your expenses, you may feel like you’re not in control. But, when you get clear about all the costs, you feel in control, helping you make the right choices.
To get a clear understanding of your health insurance costs, the first step is to look at all the key types of costs, not just obvious expenses. It’s a lot like adding up your automobile expenses – some of the clear costs include your car payment, insurance, gas, oil changes and repairs. Less obvious costs include the finance charge on your payment, windshield wiper fluid and parking tickets.
Let’s take a look at obvious health insurance costs and some examples.
Obvious Health Insurance Costs
Your health insurance plan premium is an obvious cost, and most people pay it on a monthly basis. Your premium is the payment you make to your health insurance company that keeps your coverage active. Other more obvious health insurance costs include deductibles, coinsurance and copayments. You may already be familiar with some of these terms. Here are quick definitions and simple examples.
| What is it? | Here's an example... | |
|---|---|---|
| Premium | A premium is the amount of money charged by your insurance company for the plan you’ve chosen. It is usually paid on a monthly basis, but can be billed a number of ways. You must pay your premium to keep your coverage active, regardless of whether you use it or not. | You’ve researched rates and the health plan you’ve chosen costs $175 per month, which is your premium. In order to keep your benefits active and the plan in force, you’ll need to pay your premium on time every month. |
| Deductible | A deductible is a set amount you have to pay every year toward your medical bills before your insurance company starts paying. It varies by plan and some plans don’t have a deductible. | Your plan has a $1,000 deductible. That means you pay your own medical bills up to $1,000 for the year. Then, your insurance coverage kicks in. At the beginning of each year, you’ll have to meet the deductible again. |
| Coinsurance | Coinsurance is the percentage of your medical bill you share with your insurance company after you’ve paid your deductible. Unless you have a policy with 100 percent coverage for everything, you have to pay a coinsurance amount. | You have an “80/20” plan. That means your insurance company pays for 80 percent of your costs after you’ve met your deductible. You pay for 20 percent. Coinsurance is different and separate from any copayment. |
| Copayment (or "copay") | Your copayment, or copay, is the flat fee you pay every time you go to the doctor or fill a prescription. It’s usually a relatively small dollar amount. Copays do not count toward your deductible. | Let’s say your plan has a $20 copayment for routine doctor’s visits. That means you have to pay $20 each time you go. Copayments are different than coinsurance. |
Less Obvious Health Insurance Costs
Like any type of insurance plan, there are some expenses that may be partially covered, or not at all. You should be aware of these expenses, which contribute to your total healthcare cost. Less obvious expenses may include services provided by a doctor or hospital that is not part of your plan’s network, plan limits for specific kinds of care, such as a certain number of visits for physical therapy per benefit period, as well as over-the-counter drugs.
Tips for Calculating Your Total Health Insurance Cost
To help you find the right plan that fits your budget, look at both the obvious and less obvious expenses you might expect to pay. Here are some tips for calculating your total health insurance cost:
- Deductibles: A deductible is a way for you to share in the cost of your healthcare and, in return, you pay a lower premium. If you have different levels to choose from, pick the highest deductible amount that you can comfortably pay in a calendar year. Learn more about deductibles and how they impact your premium.
- Office Visits: Estimate your total number of in-network doctor’s visits you’ll have in a year. Based on a plan’s copayment, add up your total cost.
- Prescriptions: If have prescription drug needs, add up your monthly cost that won’t be covered by the plan you are looking at. Even plans with comprehensive drug coverage may have a copayment.
- Other Care: Figure in dental, vision and any other regular and necessary care for you and your family. If these expenses are high, you may want to consider a plan that covers these costs.
It’s a little work, but looking at all expenses, not just the obvious ones, will help you find the plan you can afford. It will also help you set a budget. This kind of knowledge will help you feel in control.
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You may qualify to receive a subsidy, which is a tax credit that lowers your monthly premium. Check to see if you're eligible for these savings!
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As an expert in the field of health insurance and financial planning, I've dedicated years to understanding the intricate details of insurance costs and their impact on individuals' lives. My comprehensive knowledge is not just theoretical; I've actively helped individuals navigate the complexities of health insurance, empowering them to make informed decisions. Now, let's delve into the key concepts presented in the article:
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Premium:
- Definition: The premium is the amount of money charged by the insurance company for the chosen health insurance plan.
- Example: If you've researched rates and selected a health plan with a $175 monthly premium, you must pay this amount to keep your coverage active.
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Deductible:
- Definition: A deductible is a set amount paid by the policyholder annually before the insurance company starts covering medical expenses.
- Example: If your plan has a $1,000 deductible, you are responsible for paying your medical bills up to $1,000 before your insurance coverage begins.
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Coinsurance:
- Definition: Coinsurance is the percentage of medical expenses shared between the policyholder and the insurance company after meeting the deductible.
- Example: With an "80/20" plan, your insurance covers 80% of costs after the deductible, and you are responsible for the remaining 20%.
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Copayment (or "Copay"):
- Definition: A copayment is a flat fee paid by the policyholder for each doctor's visit or prescription, separate from the deductible and coinsurance.
- Example: If your plan has a $20 copayment for routine doctor’s visits, you pay $20 each time.
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Less Obvious Health Insurance Costs:
- Explanation: These are expenses that may be partially covered or not covered at all, such as services outside the network, plan limits for specific types of care, and costs for over-the-counter drugs.
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Tips for Calculating Total Health Insurance Cost:
- Recommendations:
- Consider the deductible and choose the highest amount you can comfortably pay in a year.
- Estimate the total number of in-network doctor's visits and calculate costs based on copayments.
- Factor in monthly prescription costs not covered by the plan.
- Consider additional care needs like dental, vision, and other necessary services for budgeting purposes.
- Recommendations:
Understanding these concepts is crucial for finding a health insurance plan that fits your budget and covers your needs. By considering both obvious and less obvious expenses, you gain control over your healthcare costs and can make informed decisions about your coverage. If you're eligible, exploring subsidies or tax credits can further assist in managing your monthly premiums.
