How Are The Costs Of Your Health Insurance Plan Calculated?
If you are not familiar with health insurance then the costs involved in a health insurance plan might seem to be a little bit complex and many people are surprised that, after they have paid what seems like an arm and a leg, they find themselves landed with a bill the first time that they make a claim. So before you are hit with a substantial medical bill therefore, it is a good idea to take a moment to learn just what sort of costs you should expect to incur on your health insurance policy.
The first and most obvious cost is the monthly premium or, in some cases, the quarterly premium or annual premium. If you are a member of a union or employer's group plan then you will usually be asked to meet only a percentage of the premium and this will frequently be taken directly from your pay check.
The majority of health insurance policies will also include an annual deductible which is a sum of money which you will have to pay before the insurance company begins to pay out on any claims. Thus, with a yearly deductible of $1,000 you will have to meet the first $1,000 of any medical bills each year before the insurance company will begin paying out. You may be familiar with paying a deductible from your experience with motor insurance policies and, if this is the case, will also know that the higher the deductible on your policy the lower your premiums will be. If you have a family health insurance plan then this will frequently include deductibles for each family member covered by the plan.
Some health insurance plans will also include a co-payment which is a fixed sum of money which you will need to pay towards each medical bill. Precisely how much you will need to pay in co-payments will depend to a large extent on the type of plan you have. For instance, co-payments on HMO plans are often lower than those on indemnity plans. Additionally, the co-payment will also vary between different types of medical service and, if you have an HMO plan, will usually increase if you are treated outside of the HMO network.
In those cases where a co-payment is not required you will generally find that this is replaced by co-insurance which is similar and is a sum of money, this time expressed as a percentage, which you will need to pay towards each medical bill. A normal co-insurance ratio is 80/20 meaning that the insurance company will meet 80% of each medical bill while you pay 20%. As in the case of co-payments, co-insurance will frequently increase if, as an HMO plan member, you are treated outside of the HMO's network. In this case you may also find that, when a claim exceeds what is considered by the insurance company to be 'reasonable and customary', you may be required to meet the additional cost.
By this time you will realize that comparing health insurance plans is about far more than merely comparing plan premiums. As a consequence, it is vitally important for you to read the details of any health insurance quote most carefully and that you avoid the frequent temptation to merely choose the plan which has the lowest monthly premium.
If you want to keep costs down and are a member of an HMO plan then you should attempt to remain within the HMO's network and, where you do feel the need to go outside the HMO's network, then compare actual treatment costs to what the insurance company considers to be 'reasonable and customary' before you undergo treatment.
You can also keep your costs down on most plans by raising or lowering your deductible and by opting for higher or lower co-insurance. Exactly how this can be achieved is beyond the scope of this short article but is a question of balancing the various different costs involved against the likelihood of having to claim on your policy.
By: Donald Saunders
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