There are a number of participants involved in health insurance. The "provider" is a clinic, hospital, doctor, laboratory, health care practitioner or pharmacy. The “insurer” or “carrier” is the insurance company providing coverage, the “policyholder” is the individual or entity that has entered into a contractual relationship with the insurance company and the "insured" is the person with the health insurance coverage. For individual health insurance, you may be both the policyholder and the insured.
A premium is the amount of money charged by an insurance company for coverage. The cost of premiums may be determined by several factors, including age, geographic area, number of dependents and tobacco consumption. Policyholders pay these rates annually or in smaller payments over the course of the year, and the amount may change over time. When insurance premiums are not paid, the policy is typically considered void and companies will not honor claims against it. Self-employed persons may deduct the cost of their individual health insurance premiums from their taxes.
Mary purchases a yearlong individual health insurance policy. The total premium cost is $2,580, to be paid in monthly installments. Therefore, Mary’s monthly premium is $215.
A copayment, or copay, is a fixed amount you pay for a covered health care service, usually when you get the service. The amount can vary by the type of covered health care service.
Sally takes her son to the pediatrician for a bad cough. She has a copay of $15 at the doctor’s office.
Cost of Visit:
Health plan pays:
A deductible is the amount you owe for health care services each year before the insurance company begins to pay. For example, if your annual deductible is $1,000, your plan won’t pay anything until you’ve met your $1,000 deductible for covered health care services that are subject to the deductible. The deductible may not apply to all services, such as preventive care services.
Deductibles are useful for keeping the cost of insurance low. The amount varies by plan, with lower deductibles generally associated with higher premiums. They are fairly standard on most types of health coverage.
John has a health plan with a $1,000 annual deductible. John falls off his roof and has to have three knee surgeries, the first of which is $800. Because John hasn’t paid anything toward his deductible yet this year, and because the $800 surgery doesn’t meet the deductible, John is responsible for 100 percent of his first surgery.
Coinsurance is your share of the costs of a covered health care service calculated as a percent (for example, 20 percent) of the allowed amount for the service. You pay coinsurance plus any deductibles you still owe for a covered health service.
John’s second surgery occurs in the same plan year as his first surgery and costs a total of $3,200. Because he has only paid $800 toward his $1,000 annual deductible, John will be responsible for the first $200 of the second surgery. After that, he has met his deductible and his carrier will cover 80 percent of the remaining cost, for a total of $2,400. John will still be responsible for 20 percent, or $600, of the remaining cost. The total John must pay for his second surgery is $800.
Out-of-pocket Maximum (OOPM)
An out-of-pocket maximum is the most you should have to pay for your health care during a year, excluding the monthly premium. It protects you from very high medical expenses. After you reach the annual out-of-pocket maximum, your health insurance or plan begins to pay 100 percent of the allowed amount for covered health care services or items for the rest of the year.
Some health plans do not count all of your out-of-pocket expenses when determining the out-of-pocket maximum. For example, some plans do not count your annual deductible, copayments, coinsurance payments, out-of-network payments or other expenses toward this limit.
Out-of-pocket Maximum Example
John’s third surgery occurs in the same plan year as his first two surgeries and costs a total of $8,000. John has already met his deductible, so he only needs to pay the coinsurance on this surgery, up to the plan’s out-of-pocket maximum (OOPM) of $3,000. Without an OOPM, John’s coinsurance total for this surgery would have been $1,600 (20 percent of the $8,000 total), but because John’s plan allows his deductible to be counted toward his OOPM, John has already spent $1,600 towards his OOPM on previous health care costs this year. Because of this, he only needs to spend $1,400 before he hits his $3,000 OOPM. Once he hits the OOPM, his plan covers the remaining costs. Therefore, John’s coinsurance total for the third surgery is $1,400—the 20 percent coinsurance cost, up to the $3,000 maximum—and his plan’s total is the remaining $6,600 (on the chart, this is shown as $5,600 before the OOPM, plus $1,000 after John hits his OOPM).
Preventive care is medical checkups and tests, immunizations and counseling services used to prevent chronic illnesses from occurring. Rather than waiting for a patient to become sick, preventive care aims to keep people healthy, or at least catch illnesses at their earliest and most treatable stages. Preventive care includes preventive and diagnostic services performed by providers, such as annual physicals or bi-annual mammograms. Under the provisions of the Affordable Care Act (ACA), non-grandfathered health insurance policies must cover various preventive services for men, women and children without sharing the cost for these services through coinsurance, deductibles or copayments. Some health plans may have additional no-cost preventive services beyond what the law requires.
Preventive Care Example
Mary schedules an appointment with her in-network health care provider for an annual physical and bi-annual mammogram. Because Mary is eligible for these preventive services under the ACA’s preventive care coverage guidelines, the total cost of the visit is covered by her health insurance.
Cost of Physical
Cost of Mammogram
Health Plan Pays