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As an increasing number of families pay nearly $1,000 a month for healthcare, many people still don't understand how medical insurance coverage works. Even though it's a necessary expense, much like cars, people don't know what's under the hood of what they're paying for.
Check out our guide for a more complete understanding of how insurance coverage works.
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You Have To Pay Up To Your Deductible
Your deductible is the amount of money that comes out of your pocket in case of illness or an accident. This is what you're responsible for paying before your insurance kicks in. Your deductible is cumulative over the year, meaning that once you've paid that amount for care, your insurance is activated.
Don't confuse this with a “copay” for doctor visits. Sometimes your doctor will ask you to pay $20 for a doctor's office visit. This doesn't help to cover your deductible.
If your deductible is $2,000, the first $2,000 of a $10,000 medical bill are all up to you. If you're not sure what kind of deductible is right for you, start by adding up how much you spent on medical during previous years. Working with an agent can help you figure out what works for you and your family.
The great thing about insurance agents is that unlike any other kind of representation, working with an insurance agent is free.
After Your Deductible, Coinsurance Begins
In most cases, there's a split between your costs and the insurance company's costs after your deductible is met. There are a lot of configurations that start at 50/50 and go all the way up to 100/0, where the insurance company pays 100% of the procedure.
The remaining $8,000 of that aforementioned bill would then be processed via this coinsurance figure. If you have a 70/30 split, your insurance company would handle $5,600 while you'd be responsible for an additional $2,400. This means that you'd pay a total of $4,400 for that $10,000 bill.
The more you're willing to pay per month, the lower your portion of the split will be and the lower your deductible will be as well. Low-cost insurance is good for emergency or extreme coverage but can still saddle low-income people with massive bills.
The Out of Pocket Max Can Help
Thankfully there's a maximum amount of money you can be responsible for. In the event that you get terminally ill or end up in a serious accident, this number is intended to keep you from going bankrupt.
Your total annual exposure allows you to only have to pay as much as is affordable in a year. Look into this number before you sign up for a plan. Having a limit that's low might cost you more but it ensures that your medical bills don't send you into debt that drags down your savings.
Co-pays Are Always Necessary
If you have a co-pay, there's no limit to the number of times you're going to have to pay it. This fee usually ranges from $20 to $50, though it can vary for specialists. Your primary care doctor will have a much lower co-pay than any specialists that you have to visit.
Some plans require no co-pays at all. These are higher-end and more expensive plans. If you go to the doctor often, you'll find this to be an expense that can add up quickly.
Some plans have unlimited visits while others will only cover a handful every year. If you're getting older and know that you have a family history of health issues, it's good to do away with limits when possible.
Wellness Is Usually Covered
Healthcare professionals and insurance companies alike understand that preventative healthcare is a smart idea. That's why almost every healthcare plan now comes with low-cost or free preventative checkups.
Physicals, mammograms, colonoscopies, and other checkups are a part of just about every reputable plan.
Child wellness care is also important in forming good habits. Money spent on child healthcare at an early age pays off later on for health insurance companies. Health insurance companies have run the numbers and found that clients who cost them the least at an advanced age formed healthy habits at a young age.
How They Cover Prescriptions
Every plan is a little bit different when it comes to paying for prescriptions. Many plans outsource their coverage for medication to a separate company or subsidiary.
You can get generic drugs for a very low deductible but will have to pay more for brand name pills. Some plans charge a high deductible for brand names to get their clients to choose cheaper generics. However, under a few plans, generics aren't subject to a deductible at all.
Review the summary of benefits online or with an agent so that you can decide what works for you and your family. More rare or expensive-to-treat issues require a brand name and more expensive medication. This can make a big difference in how much your healthcare costs are each year.
If you worry about your medication not being covered, look into some tricks for handling medication cost.
Medical Insurance Coverage Doesn't Have to Be Confusing
While medical insurance coverage is necessary for everyone, there hasn't been enough of an effort to make it easy to understand. Thankfully, working with insurance agents is a free service provided by all insurance companies. This can help to illuminate some of the more complicated issues in health insurance and to keep clients from being overwhelmed with the complexity.
IF you think you need supplemental insurance to extend beyond your current coverage, check out our guide for more info.