If you are unfamiliar with health insurance then the costs involved in a health insurance plan could seem to be somewhat complex and many people are surprised that, after they have shelled out what seems like a small fortune, they find themselves landed with a bill the very first time they make a claim. Before you are landed with a substantial 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 a union or employer’s group plan then you will usually be required to pay only a percentage of the premium and this will normally be taken directly from your pay check.

The majority of health insurance plans will also include an annual deductible which is an amount of money which you will need to pay before the insurance company begins to pay out on any claims. So, with a yearly deductible of say $1,000 you will have to pay the first $1,000 of your medical bills each year before the insurance company will begin paying out. You might be familiar with the principle of paying a deductible from your experience with car insurance and, if this is the case, will know that the more the deductible on your plan the lower your premiums will be. In addition, if you have a family health insurance plan then this will frequently include deductibles for each family member covered under the plan.

The majority of 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 very much on the type of plan which you hold. For example, co-payments on HMO plans are frequently 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 be higher if you seek treatment outside of the HMO network.

In cases where no co-payment is required you will generally find that this is replaced by co-insurance which is very similar and is an amount of money, this time expressed as a percentage, which you will be required to pay towards each medical bill. A typical co-insurance ratio is 80/20 meaning that the insurance company will pay 80% of each medical bill while you pay 20%. As in the case of co-payments, co-insurance will normally increase if, as a member of an HMO plan, you seek treatment outside of the HMO’s network. In this case you may also find that, where 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 now you will realize that comparing health insurance plans is about considerably more than just comparing plan premiums. As a consequence, it is critically important for you to read the small print of any health insurance quote most carefully and avoid the common temptation to just pick the plan with the lowest monthly premium.

If you wish to keep your costs low and are in an HMO plan then you should attempt to remain within the HMO’s network and, if you do feel the need to go outside the HMO’s network, then compare the actual cost of treatment to what the insurance company considers to be ‘reasonable and customary’ before undergoing treatment.

You can also keep your costs down on many plans by raising or lowering your deductible and by opting for higher or lower co-insurance. Precisely how this can be achieved is beyond the scope of this short article but is a matter of balancing the different costs involved against the probability of having to make a claim against your plan.

Filed under: Health Insurance