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The Plain English Guide to Understanding Health Insurance Deductibles, Coinsurance and Maximum Out-of-Pocket Expenses

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YOCG Tuesday 11 24 15 CANVAWhether you just enrolled or you are getting ready to enroll in a new health care plan there are 3 things you need to clearly understand regarding your new policy.  They are:

  1. Deductibles
  2. Coinsurance
  3. Maximum Out of Pocket Expenses

Many times the policy you have is written in industry jargon that it is hard to understand just what is exactly being said.  We are going to cut through the jargon for you and simplify the terms so you completely understand this portion of your health insurance policy.

Deductibles:

A deductible is the amount you pay for healthcare services before your health insurance policy begins to pay.  Below is an example:

  • Jane’s health insurance deductible is $1,000.
  • In most cases, other then the items below, Jane will need to pay 100% of her medical and pharmacy bills until she has paid out $1,000 ….
    • Doctor co-pays
    • Medication co-pays
    • Annual wellness checkup
  • Once Jane has met her deductible amount of $1,000 she shares the cost of her plan by paying coinsurance.

Coinsurance:

Coinsurance is your portion or share of the costs of healthcare.   Depending on the type of health insurance plan you have, your percentages may vary.

Below is an example:

Jane enrolled in a health insurance plan that included a coinsurance program.  The coinsurance program Jane’s health insurance carrier provided was an 80/20 plan.  The 80/20 plan means that after Jane meets her deductible of $1,000, the insurance company will pay 80% of healthcare services.  Jane will be responsible for 20% of the costs up to her maximum out of pocket limit.

For example:

After Jane meets her $1,000 deductible, she makes an appointment to see her doctor.  Since Jane has met her deductible, coinsurance is now available for Jane to use.  Jane’s health insurance offers an 80/20 coinsurance plan.

For simplicity sake, let’s say it costs $1000 for a medical procedure.  Based on Jane’s 80/20 coinsurance plan, this is how much Jane and the insurance company will each pay to cover the cost of her visit to the doctor.

  • Jane’s health insurance company will pay 80% = $800
  • Jane will pay 20% = $200

Its important to note that once Jane hits her maximum out of pocket limit the insurance company pays 100%

Sometimes people use the terms co-insurance and co-pay interchangeably.

Please know, they are two very different things.

A co-pay is a specific, fixed dollar amount you must pay every time you visit a doctor.  It is not a percentage of doctor fees as described above. To find out what your plan requires, call the customer service number on the back of your insurance card or the insurance agent who services the policy.


YOCG Monday 11 23 15 Canva-2Maximum Out-Of-Pocket Expenses:

An out-of-pocket expense is a non-reimbursable expense paid by the patient.  This is most you will pay for covered services during a health insurance policy period.   A health insurance policy period is usually a year.  The year is usually based on the calendar year starting January 1 and ends December 31.

What IS Included in Maximum Out-Of-Pocket Expenses:  

All of these items go toward your Maximum Out-Of-Pocket Expenses.  Please note that if your plan does not cover a particular service, or the service is not an essential benefit, it may not count toward your maximum.  You would need to clarify this with your health insurance plan.

  • Your yearly deductible
  • Includes cost sharing after the deductible is met
  • In most cases the co-pays

What is NOT Included in Maximum Out-Of-Pocket Expenses

  • Premiums
  • Healthcare services your health insurance does not cover

The maximum out-of-pocket limit for those on Obamacare compliant Plans:

  • Individual: $6,850
  • Family: $13,700
  • In many cases the amounts are lower based on income and family size.

Hopefully our guide gave you more clarity about deductibles, Coinsurance and Maximum Out-of-Pocket Expenses.  The best advice for you to follow is; talk to a professional about health insurance and get the guidance you need to ensure you are selecting the plan that is the best for you and your family’s situation.

Are you unsure who you should talk to?  Call me, Your Obamacare Guy!   You can reach me at:  (813) 391-3448 or email me:  dave@YourObamacareGuy.com.

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