Breaking Down Health Insurance Terminology

So Many Terms

So you've decided to enter the wonderful world of buying health insurance, only to find it is incredibly complex and complicated. Could there be a simple, streamlined system for buying health insurance? It would be nice, but for now we have to live with the system we have, which can confusing. This hub is going to explain some of the terminology used in health plans in an attempt to make it easier for those trying to understand how to buy health insurance.

Premium

The premium is the monthly amount you pay as part of your health care plan. You pay the premium every month, in the same amount, regardless of what health care you've used, if any. If you never go to the doctor all year, all you will pay is the same premium every month. The premium can readjust(go up) once a year to a new payment amount.

Deductible

You health insurance deductible is like your car insurance deductible - it is the amount of your health care costs you must pay before your health insurance provider starts to cover your bills. A plan with a $500 deductible requires you spend $500 of your own money before the insurance will kick in. This does not include the money you've spent on your premium, only your actual heatlh care costs. And those costs must be billed through your insurance company.

Copay

The copay is an amount you pay when you go to the doctor's office. If your plan a has a $25 copay, you must pay $25 to visit the doctor, and usually that is due the day of the visit. The copay does not count towards your deductible. Copays are generally small amounts, but they can add up quickly if you make lots of office visits throughout the year.

Coinsurance

Coinsurance complicates things even further. Coninsurance is a percentage of your medical bills you are responsible for. If you have 20% coninsurance, that means you will pay 20% of your actual heath care costs billed through your insurer. Well for the most part. If you also have a deductible, that will have to be paid 100% first, then your coinsurance kicks in.

Usually there is a limit to the amount you have to pay under coinsurance. For instance a plan may have a $1,000 deducitble then a 20% coinsurance up to $10,000. Say you got a $10,000 medical bill. You would pay the first $1,000. Then you would pay 20% of the remaining $9,000. After that you would have paid everything you are responsible for, and any further health care costs would be picked up by your provider - for that calendar year.

That's right, on January 1st everything resets to zero and you have to start to pay all over again.

Take Your Time

Buying health insurance can be complicated. Take your time and do your homework. Read as much as you can. The four terms used in this hub, premium, deductible, copay and coinsurance are going to be your four main costs of health insurance. Make sure you know exactly what each one of these costs are before you select any health care plan. Focusing on just one aspect - like the premium - can set you up for unexpected costs later. And that is no fun at all.

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