Deductible… coinsurance… out-of-pocket. What do these terms mean? More importantly, how do these terms impact what you’ll pay for health care?
To understand how your insurance company covers your claims and determine what you will owe to your healthcare provider, it can be helpful to first understand these terms.
Health Insurance: Arrangement with an insurance company to help protect you from the high costs of health care and improve access to health care services. Health insurance works by spreading the cost of care among large groups of people. Insurance premiums paid by one person help pay for the care of others.
Deductible: Amount you owe for health care services each year before the insurance company begins to pay.
Embedded deductible: Embedded deductibles have two components: individual deductibles for each family member and a combined family deductible. When a family member meets his or her individual deductible, the insurance company will begin paying according to the plan’s coverage for that
member. When the total amount the family has paid towards individual deductibles reaches the family deductible, the insurance company will then begin paying according to the plan’s coverage for all family members.
For example: Olivia and Tyler have a family health plan that has a $1,500 individual deductible and a $3,000 family deductible that covers them and their three children. Olivia meets her $1,500 deductible after giving birth to their youngest child in February. Son Sam breaks his leg and also meets his $1,500 individual deductible in March, which means the family deductible of $3,000 has now been met. When Tyler needs carpal tunnel surgery later in the year, he does not have to satisfy a deductible before the plan begins to pay.
Non-embedded deductible: Non-embedded, or aggregate, deductible is simpler than an embedded deductible. With a non-embedded deductible, there is only a family deductible. All family members’ out-of-pocket expenses count toward the family deductible until it is met, and then they are all covered with the health plan’s usual copays or coinsurance. It doesn’t matter if one person incurs all the expenses that meet the deductible or if two or more family members contribute toward meeting the family deductible.
For example: Antonio and his family have a health plan with a nonembedded deductible. The family deductible is $2,600.
Daughter Isabella had acute appendicitis that required surgery costing $2,300. Antonio sprained his ankle and medical care cost $400. The combined out-of-pocket expenses from Isabella’s and Antonio’s medical treatments met the family deductible; any further medical care for anyone in the family will be covered by the insurance company according to the plan benefits.
Coinsurance: Your percentage share of the allowed costs for a covered health care service.
For example: Joe’s surgery costs $8,000. Because he has a $1,500 annual deductible, Joe is responsible for the first $1,500 of the surgery. After that, he has met his deductible and his carrier will cover 70 percent of the remaining cost, a total of $4,550. Joe will still be responsible for 30 percent, or $1,950, of the remaining cost. Therefore, the total Joe must pay for his surgery is $3,450.
Out-of-Pocket Maximum (OOPM or OPM): An OPM protects you from very high medical expenses. It is the most you should have to pay for your health care during a year, excluding the monthly premium. After you reach the OPM, your plan begins to pay 100 percent of the allowed amount for covered services for the rest of the year.
Copayment: A copayment, or copay, is a fixed amount you pay for a covered health care service, usually when you get the service. Deductibles often will not apply when a copay is assigned to a service.
Preventive care: Proactive, comprehensive care emphasizing prevention, early detection, and early treatment of conditions. Generally includes routine physical exams, immunizations and well-person care.
Office visit: Services provided in a physician’s office.
Urgent care center: Health care facility whose primary purpose is the provision of immediate, short-term medical care for minor but urgent medical conditions. Serves as an alternative to the hospital emergency room.
Emergency services: Services provided for an unforeseen acute illness or injury that requires immediate medical attention.
Telemedicine (telehealth): Technology-based visits that allows a doctor and patient to communicate without being in the same physical space. Serves as another alternative to emergency care as well as to urgent care or office visits. Telemedicine is not a complete replacement for direct patient care, but it can be used to evaluate, diagnose and prescribe treatments for many common illnesses for lower costs and at times when primary care physicians are not available or open.
Participating provider (In-Network Provider): Health care provider (clinic, hospital, doctor, laboratory, health care practitioner or pharmacy) who has contracted with a particular insurance carrier or health plan to provide health care services to its members.
Primary care physician (PCP): Physician who is responsible for monitoring and coordinating a patient’s overall health care, and refers the patient to appropriate specialists when necessary. Many managed care plans require members to choose a PCP as part of their strategy to increase their quality of care and control costs.