How do Deductibles and Coinsurance work? What is the difference?
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How do deductibles, copays, co-insurance and maximums work?
The simple answer is they define the different ways health insurance companies pay most of the costs to keep you healthy. Prescription drug coverage also uses copays which can increase for specialty medicines and decrease for generic drugs. Incidentally, in order to encourage healthy behavior, many insurers waive copays for preventive care.
Let’s say you go to the doctor with the flu. Your doctor charges a $25 copay, and when you fill the prescription, pays a $10 copay to the pharmacy. Your out-of-pocket costs are $35, and your insurance company will reimburse the pharmacy and the doctor for the difference between the copay and the cost of treatment.
Co-insurance is the way you and your health insurer share the costs of your care. For example, if you are injured, and have already met your deductible for the year, your health plan will pay 80% of the cost of the rest of your bills leaving you responsible for the remaining 20%.
Maximum Out-Of-Pocket is the largest amount of money you will be responsible for during one calendar year. So you won’t pay more than a set amount in a year no matter how high his medical expenses are. However, out-of-network maximums are often times significantly greater than in-network maximums so be cautious when going out of network.
Your deductible is the amount of your medical costs that you have to pay before your health insurance takes over. Here’s an example. Let’s say you have a health plan with a $1500 deductible. If you only have a few little things go wrong during the year that cost less than $1500 total, you pay the full amount to treat them.
However, if you have a catastrophic injury or serious illness that requires a lot of medical care to get better, you’ll pay the $1500 deductible and then your health insurance takes over to pay most if not all of his additional costs. It’s a way for you to shoulder some of the responsibility for health while still affording protection from huge medical expenses.
To sum it up, you pay copays when you see the doctor. Co-insurance is how you and your insurance company split up your care. Maximum Out-of-Pocket is the largest amount you will pay for treatment in one year. And, deductibles are the portion you must pay before your insurance pays its share.
Be sure to review your plan summaries in detail to fully understand your benefits.