You probably don’t give your health insurance a thought until you need it, and then, depending on what kind of plan you have and care you need, you see the word copay. Or coinsurance. Or deductible. What do these terms mean? Common health insurance terms can be confusing. But learning the definitions can help you to better understand your plan and use it to your benefit.
What is coinsurance?
Your share of your care
For some services, you share the cost with your health plan. Instead of a flat fee like a copay, the percentage of the total cost of your care that you pay is called coinsurance.
A good coinsurance percentage depends on how much coverage you need each year – if you frequently visit the doctor, a plan with a high monthly premium that will likely have lower coinsurance may be right for you; if you rarely visit the doctor, a plan with a low monthly premium but higher coinsurance may work for you.
Many people have a plan that has an 80/20 coinsurance policy, meaning your health insurance provider pays 80% of your medical expenses, and you cover the other 20%, but coverage varies by provider. Say the cost of X-raying, diagnosing and putting a cast on a broken wrist adds up to $1,200. If your plan calls for you to cover 20%, you can expect a bill for $240. Your plan takes care of the rest.
What is copayment (copay)?
Flat fee for a standard service
The flat fee you pay when you use specific services – like having a doctor take a look at your wrist – is called a copayment, or copay for short. You’ll usually pay the set amount, say $40, at the clinic when you get care. Your copay for different types of care likely appears on your insurance card. Compare these costs when you’re deciding whether to call your doctor’s office for an appointment, swing by an urgent care or convenience clinic on your way home from work or head straight to the emergency room.
What you pay before your plan pays
The amount you have to pay yourself, each year, before your plan will pitch in for your care is called a deductible. For example, if this amount is $500 a year, your plan won’t pay for any of your care until you’ve paid $500 out of your own pocket for things like doctor visits and X-rays (monthly costs, or premiums, don’t count). Let’s say you’ve already paid $300 this year for doctor visits, a few tests and a prescription or two. If you have to seek any more care this year, you’ll pay the first $200 of your costs to hit that $500 amount, and your health plan will help you pay for the remainder of your costs.
Embedded deductible meaning
What you pay for a single family member’s care before your plan pays
If you’re on a family plan, you may have two different amounts you have to pay before your plan starts to help: one for individual family members and one for your whole family’s care combined. The amount for an individual family member is called an embedded deductible, and it can help you save money if one family member has higher medical costs. Once you’ve paid that amount for that family member’s care, your plan will help pay for their care for the rest of the year – even if your family combined hasn’t paid enough yet for the plan to start helping.
Health insurance premium definition
How much you pay each month
The amount you pay for your health plan each month, whether you use any care or not, is called a premium. Whether your wrist is broken or sprained and just needs some ice, your monthly premium stays the same.
The most you’ll pay for your care
The absolute most you’ll pay for your care for the year is called the out-of-pocket maximum. Once you’ve paid enough to hit your plan’s out-of-pocket maximum, your plan will pay 100% of any other covered care you have for the rest of the year. So, if you faced some big health challenges earlier in the year and your broken wrist is just the icing on the cake, you won’t pay a penny if you’ve already hit this ceiling.
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