If you are unfamiliar with health insurance then the costs involved in a health insurance plan may seem to be a little complicated 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 submit a claim. Before you are hit with a large medical bill therefore, it would be a good idea to take a minute to understand just what sort of costs you can expect to incur on your health insurance plan.
The first and most obvious cost is the monthly premium or, if you so choose, the quarterly or annual premium. If you belong to an employer's or union group insurance plan then you will usually be required to pay only a percentage of the premium and this will normally be deducted from your pay check.
Most health insurance policies will also include an annual deductible which is an amount of money which you will be required to pay before the insurance company begins paying out on any claims. So, with a yearly deductible of say $1,000 you will need to pay the first $1,000 of any medical bills each year before the insurance company will start paying out. You might be familiar with the principle of paying a deductible from your experience with motor insurance policies and, if this is the case, will know that the more the deductible on your plan the lower your premiums will be. If you have a family plan then this will frequently include multiple deductibles for the individual members covered under the policy.
Some plans will also include a co-payment which is a fixed amount of money which you will be required to pay towards each medical bill. Just how much you will be required to pay in co-payments will depend to a large extent on the type of policy you have. For instance, co-payments on HMO plans are generally lower than those on indemnity plans. Additionally, the co-payment can also vary between different types of medical service and, if you are a member of an HMO plan, will usually increase if you seek treatment outside of the HMO network.
In those cases where no co-payment is required you will often find that this is replaced by co-insurance which is similar and is an amount of money, in this case 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 pay 80% of each medical bill while you pay 20%. As with co-payments, co-insurance will normally rise if, as an HMO plan holder, you seek treatment outside of the HMO's network. In this case you will also find that, when a claim exceeds what is considered by the insurance company to be 'reasonable and customary', you may be required to pay the additional cost.
By this time you will see that comparing different health insurance plans is about a great deal more than merely comparing plan premiums. For this reason, it is critically important for you to read the details of any quote very carefully and avoid the frequent temptation to simply choose the plan which has the lowest monthly premium.
If you wish to keep costs low and are a member of an HMO plan then you should attempt to stick inside the HMO's network and, if you do feel the need to go outside of 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 under control on most plans by raising or lowering your deductible and by selecting higher or lower co-insurance. Precisely how this can be done is beyond the scope of this short article but is a matter of balancing the various different costs involved against the probability of needing to claim against your plan.
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Title: Exactly How Are the Costs Of A Health Insurance Plan Made Up?
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