Key Take Aways:
- Deductibles. What it is, and what it means.
- How is a copay different than a deductible?
- What is coinsurance?
Deductibles, copays, and coinsurance, oh my.
Every industry has its own jargon—and health insurance is no exception. At Naviguard, we’re health insurance experts. Helping patients and employers manage the confusing world of out-of-network health care is what we do every day, all day. We believe the better you understand insurance, the better you can make smart decisions about your health care and avoid costly pitfalls.
Let’s start with how health insurance works: the 30,000 foot view.
The whole goal of health insurance is to make health care—which can be quite expensive on an individual level—more affordable. When your employer offers a health plan, you pay in a monthly payment that allows you to utilize the plan benefits when you get sick or injured.
And because most of us are healthy most of the time, those monthly payments we make when we’re well help cover expenses when we’re not.
Health insurance plans help manage their own unpredictable costs in a number of ways—by negotiating lower, discounted rates with certain groups of providers, and so on. They also do it by sharing some of the costs with their members. And that’s where the hard-to-understand terms come in.
First, Your Deductible:
What it is, and what it means
Your annual deductible is the amount you pay in medical costs each year before your health insurance payer (which could be your employer if you work for a large company) starts to pay its share. For instance, if your plan’s deductible is $3,000, you’re responsible for paying all of your health care costs up to $3,000 within the year, after which point your health plan begins to share the cost of covered services.
Lower deductibles/higher premiums. Or vice versa.
Deductibles vary from one insurance plan to another and between individual and family plans. Generally, you’ll pay more in month-to-month premiums for a plan with a lower annual deductible, and the opposite is also true. (Unfortunately, your monthly premiums do not apply toward meeting your deductible.)
Tip: A higher premium/lower deductible plan can help you better predict your health care costs for the upcoming year, as you know your out-of-pocket costs can only go so high.
Bonus Tip: If you join a new plan toward the end of the calendar year (for example, you change jobs in September), it may be better to choose the higher premium plan over the high deductible plan, as you are unlikely to meet your deductible by the end of that year.
Different out-of-network deductibles
If your plan includes some out-of-network benefits (meaning, some insurance coverage for providers who aren’t contracted with your insurance company ahead of time), you’ll likely have a separate, and higher deductible to meet if you use out-of-network services—even if you’ve already met your in-network deductible. Which is another reason you’re usually better off financially using in-network doctors, hospitals and services.
For all of these reasons, it’s important to know and consider the annual deductible when choosing a health plan. And once you’ve chosen your plan, be sure to research your in-network options thoroughly so you don’t wind up paying more than you expected.
OK, onto Copays.
How is a copay different than a deductible?
A copay is a fixed amount you pay up front each time you receive care or fill a prescription. For instance, your insurance plan may have a $20 copay for a doctor’s visit, or a $45 copay for a visit to a specialist, which you’d pay at the time of your appointment. Depending on your type of health insurance, your copays may or may not apply toward meeting your annual deductible.
The lower-copay-higher-premium tradeoff.
Some insurance plans offer lower copays in exchange for higher monthly premiums or vice versa (in the same way that a lower annual deductible may be reflected in higher monthly premiums.) For many people, it’s hard to predict which combination will prove the most cost-effective in the year ahead, but your own family’s past healthcare needs can help guide you.
Do you always have a copay?
Not always. Some health plans may use both copays and/or deductibles or coinsurance (which we’ll talk about next). It can depend on the type of service you receive. Many plans cover preventive services like mammograms, routine physicals, well-visits, vaccinations, etc. without copays—at least for in-network providers. And again, as a general rule, copays are always lower for in-network providers/services than if you go out of network.
The least-understood term of all.
Coinsurance is always accompanied by a percentage sign—because it’s a percentage of medical costs you pay AFTER you’ve met your annual deductible. That amount varies (again, of course!) by plan. If your coinsurance is 20%, it means that once you’ve paid your full deductible, you’ll pay for 20% of the healthcare you receive after that, and your insurance plan will pay for 80%.
Let’s put that 20% coinsurance into an equation. Say you have a $3,000 CAT scan, and your deductible is $2,000. Once you’ve paid the $2,000 deductible, you would be responsible for 20% of the remaining $1,000—which is $200. Your insurance company would be responsible for 80% of the $1,000, or $800.
Your applied Deductible
+ Amount paid by insurance
= ALLOWED AMOUNT
Good news, there’s a cap.
With coinsurance, you’re responsible for a smaller percentage of your medical costs than your insurance company but even so, the prospect of a massive bill is daunting. Twenty percent of a lot is still a lot! Luckily, every insurance plan has an out-of-pocket maximum. Once you hit this limit, the insurance company will pick up 100% of your covered costs for the rest of the year–at least for in-network services. And as you might expect, your coinsurance for in-network services is often less than your-coinsurance for out-of-network service.
Once again, health plans with lower monthly premiums often have higher coinsurance percentages—meaning you’re responsible for footing more of the bill yourself—and they often have higher out-of-pocket maximums, as well. Neither of those are inherently bad, as long as you understand the financial benefits and drawbacks ahead of time. Again, plans with higher monthly premiums and lower coinsurance percentages can help you more accurately estimate your health care costs for the year, because out-of-pocket costs can’t go unpredictably high.
Phew! That’s a lot. So where does Naviguard come in?
Clearly, health insurance is complex. We created Naviguard to bring clarity to what patients say is one of the biggest causes of confusion and stress: out-of-network rules and billing challenges. We’ve worked with tens of thousands of members and hundreds of employers to resolve difficult, out-of-network billing issues, and we can do the same for you if you are a member in a participating health plan. For members in an employer-sponsored Naviguard participating plan administered by UnitedHealthcare, this no-charge service is included under your plan benefits.