Here’s a quick run through of how health insurance works:
When you sign up for a health insurance plan, there is a monthly fee called a premium. The monthly premium is like a subscription fee for your health insurance.
In return, the health insurance company will help you save money in two ways: First, health insurance companies negotiate better rates with medical facilities so that you won’t have to pay the full amount. Second, they will then help pay a portion of your medical expenses.
For example, the average cost of having a baby in North Carolina is $13,000 if you’re uninsured. With an ACA plan however, you won’t pay anywhere near that amount.
Just to recap, not only is the original cost reduced, insurance will pay a percentage of that reduced price. Accidents happen and anyone can get sick at any time, but if you have health insurance… you’re covered.
Here are some important things to know:
What is a premium?
A health insurance premium is the monthly subscription cost to continue being enrolled in coverage.
All ACA plans have a premium, though subsidies (aka tax credits) can cover some or all of the premium amount.
What are copayments?
Copayments are what you are required to pay to see a doctor or specialist. It is a fixed amount that varies depending on your policy.
Primary Care, Specialists, Urgent Care and Emergency Rooms all may have copayment amounts. If you frequently see a specialist for example, it is an important cost to consider.
Note: Co-pays do NOT count towards your deductible or out-of-pocket max amount.
What is a deductible?
A deductible is the cost threshold of qualified expenses that must be met before the insurance company will start paying for expenses.
For example, a plan with a $3,000 deductible and 80% coinsurance:
A surgery costs $8,000 – the first $3,000 is paid out of pocket and the insurance will pay 80% of the remaining $5,000 that is due. Yor total cost is $4,000 of the $8,000.
A surgery that costs $16,000 – the first $3,000 is paid out of pocket and the insurance will pay 80% of the remaining $13,000 that is due. Your total cost is $5,600 of the $16,000.
What is coinsurance?
Coinsurance is the percentage of qualified costs that the insurance company pays after you meet your deductible. It varies by policy.
For example, let’s say you have a $3,000 deductible and 80% coinsurance. If you have $15,000 in medical expenses, your coinsurance amount is the percentage the insurance company would pay of the $12,000 after you meet your deductible. If your coinsurance is 80%, you are only responsible for 20% of post-deductible costs.
Therefore, your cost in this example would be the $3000 to meet the deductible, then $12,000 * 0.2 = $2,400.
Your final cost would be $5,400 of $12,000.
What is an out-of-pocket max?
An out-of-pocket max is the absolute maximum that an enrollee will have to pay in qualified expenses in one calendar year.
Prescription costs DO count towards the Out-of-Pocket Max. The only expense that doesn’t qualify to count towards the out-of-pocket max figure is copays.
For example, if a plan has a $3,000 deductible, a coinsurance of 80% and an $8,150 Out-of-Pocket Max:
A surgery costs $23,000 – the first $3,000 is paid out of pocket to meet the deductible and the insurance will pay 80% of the remaining $20,000 that is due. Your total cost is $7,000.
A surgery costs $30,000 – Your total cost is $8,150.
A surgery costs $100,000 – Your total cost is still $8,150.
What does in-network mean?
Health Insurance companies negotiate with hospitals and doctor’s offices to help keep costs low for their insureds. Those negotiations mean the insurance companies pay less at those facilities and in turn pass on those savings to you. The cost savings can be substantial, so it is definitely worth trying to find in-network options whenever possible.
Different plans will have different networks. The doctors that are “in-network” is one of the most important factors to consider when deciding which plan is right for you.
What is the difference between a PPO and an HMO?
PPO stands for Preferred Provider Organization. In a typical PPO, there are huge cost savings by visiting doctors and practices that are in-network, as mentioned above. Some level of coverage is offered for out-of-network facilities as well, but it is typically much less meaning you pay more. A PPO provides more flexibility than an HMO. The best example of a PPO in NC is BlueCross.
HMO stands for Health Maintenance Organization. In a typical HMO, there is no coverage whatsoever offered for out-of-network doctors. While this option has a cheaper premium, it is incredibly important to make sure you check that a medical facility is in-network in advance, or you will have to pay the full cost of the services. If you are unsure whether or not a specific doctor or facility is in-network, be sure to check with your agent. A common example of an HMO in NC is Aetna.
Hopefully this brief guide has helped you understand insurance just a little better.
For more information, call one of our offices at 252-495-8965 or text us at 252-347-6572. We are always happy to help!