How Are the Costs Of Your Health Insurance Policy Are Calculated?
Unless you are familiar with health insurance then the costs involved in a health insurance plan can appear to be a bit complex and many people are surprised that, after they have spent what seems like a small fortune, they find themselves landed with a bill the first time they submit a claim. Before you are landed with an enormous medical bill therefore, it is a good idea to take a minute to learn just how health insurance plan costs are arrived at.
The first and most obvious cost is the monthly premium or, in some cases, the quarterly or annual premium. If you belong to a union or employer's group insurance plan then you will generally be required to pay only a percentage of the premium and this will usually be taken directly from your pay check.
Most health insurance plans 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. So, with an annual deductible of say ,000 you will need to meet the first $1,000 of your medical bills each year before the insurance company will start paying out. You may be familiar with paying a deductible from your experience with motor insurance and, if this is the case, will know that the higher the deductible on your policy the lower your premiums will be. Also, if you have a family health insurance plan then this will typically include multiple deductibles for the individual members covered by the policy.
Some health insurance policies will also include a co-payment which is a fixed sum of money which you will have to pay towards each medical bill. Just how much you will have to pay in co-payments will depend very much on the type of policy you have. For instance, co-payments on HMO plans are often lower than those on indemnity plans. Additionally, the co-payment can also vary between different forms of medical service and, if you are enrolled in an HMO plan, will generally rise if you seek treatment outside of the HMO network.
In those cases where a co-payment is not required you will usually 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 common co-insurance ratio is 80/20 meaning that the insurance company will meet 80% of any medical bill while you pay 20%. As for co-payments, co-insurance will usually increase if, as an HMO plan member, you seek treatment outside of the HMO’s network. In this case you may also find that, when a claim exceeds what the insurance company considers to be 'reasonable and customary', you may be required to pay the additional cost.
By now you will see that comparing health insurance plans is about considerably more than merely comparing premiums. Accordingly, when you are trying to find an affordable health insurance plan it is critically important for you to read the small print of any quote most carefully and that you avoid the common temptation to simply select the plan which has the lowest monthly premium.
If you wish to keep your costs low and are in an HMO plan then you should attempt to remain inside the HMO’s network and, when you do feel the need to go outside the HMO's network, then compare actual treatment costs to what the insurance company considers 'reasonable and customary' before undergoing treatment.
It is also possible to keep your costs under control on most plans by raising or lowering the deductible and by selecting higher or lower co-insurance. Precisely how this can be done is beyond the scope of this particular article but is a matter of balancing the various different costs against the probability of needing to claim on the policy.