A doctor helping his patients in understanding health insurance

Simple Guide to Understanding Health Insurance

Every year, the cost of medical care rises. In 2018, spending for health care in the United States rose to $3.6 trillion! Because of these costs, having health insurance is a necessary part of protecting yourself from unexpected hospital bills or even just preventative care! But understanding health insurance isn’t easy, making it seem impossible to choose a plan that’s right for you.

If you’re unfamiliar with the basics of health insurance, read this crash course on understanding the basics to make sure you can select the best health insurance for you or your family!

How Does Health Insurance Work?

The best way to start understanding health insurance is to understand the core terminology and how it applies to you:

Premium

Your premium is like a “subscription” cost. It’s a monthly cost that is either paid directly or can be deducted from your paycheck if your insurance comes from your employer. If you stop paying your premium, you will be denied coverage.

The cost of health insurance premiums varies based on the scope of coverage. The more you pay for your premium, the less you’ll typically pay for care when you need to make a claim. This can be a common trap for those looking to save money.

Don’t base your choices on plans exclusively based on the premium cost. If you have children, are chronically ill or prone to accidents, a higher premium plan could potentially save you money. When looking at multiple providers, premium costs can also vary depending on how wide their “in-network” area is and the type of plan it is.

One thing to remember when understanding health insurance premiums is your premium is separate from claims and other costs. It will never apply to your deductible, nor will it apply to your out-of-pocket maximum.

Deductible

Your health insurance plan will have a deductible, just like other types of insurance. This deductible is the cost you must pay out-of-pocket before the coverage of your insurance is factored in. Deductibles are one of most important parts of your health insurance, and heavily dictate the cost of your premium.

For younger or generally healthy individuals, a high-deductible health plan can save you money on your premium but will often not provide much coverage unless you have an extremely costly medical event. On the other hand, a low-deductible plan can cost several hundred dollars more per month but cover most or all the costs of your frequent healthcare visits.

The deductible is a good place to start when choosing health insurance plans, as it can help you identify whether the plan will offer enough support for your medical needs. The more you plan to visit your doctor, a specialist or need on-going care, the more important it is to choose a lower deductible plan.

Copays & Coinsurance

Outside of deductibles, some medical coverage from your health insurance is based on co-pays or coinsurance:

Copay – A flat dollar amount you pay for a specific medical visit. For many types of health insurance, copays are used for medical costs like a standard doctor visit, visiting a specialist or even a hospital visit. You may need to pay $15, $25 or $50 per visit as a co-pay, but then your insurance will cover the rest.

Coinsurance – Unlike copays, coinsurance is a percent. If coverage on your plan details coinsurance, it means you have to pay that percentage of the cost, and your provider covers the rest. Coinsurance from the provider typically applies only after you’ve met your deductible.

Detailed breakdowns of how a plan covers specific events, operations or visits are available for any plan. When you pay a copay or coinsurance, these costs apply to your deductible and out-of-pocket maximum.

Out-of-Pocket Maximum

The last major part of a health insurance plan is the out-of-pocket maximum. As the name implies, this is the total amount you will have to pay for your health care through that coverage year. If your out-of-pocket maximum is $5,000, and you’ve spent that much on medical bills, your health insurance will cover any additional medical bills.

Out-of-pocket maximums help protect you during periods where medical costs may spike, such as following a major accident, surgery or illness. However, it’s important to remember that it only applies to a given year. Once a new year rolls around, your out-of-pocket maximum resets and you’ll have to pay for medical expenses as your plan dictates until you reach that maximum again.

Does Health Insurance Cover Everything?

The answer to this question varies from plan to plan. The United States Affordable Care Act introduced “minimum essential coverage standards.” For plans to meet these standards and be labeled as “qualified health plans,” they must cover some essentials:

  • Hospitalization
  • Ambulatory services
  • Preventive health care and chronic disease management
  • Rehabilitative services or devices
  • Pediatric services
  • Maternity care
  • Prescription drugs
  • Emergency services
  • Laboratory services
  • Mental health or substance abuse services

That’s not to say that all plans cover these the same in terms of costs, copays or coinsurance, but that as long as these services are necessary and fit other guidelines such as using in-network care they are subject to coverage as part of the plan.

More expensive plans tend to have more wide-ranging coverage. While some basic plans may not offer any coverage until you hit your deductible, other plans may offer flat copays or full coverage for services like specialist visits or lab work.

Contact Iott Insurance for a Quote Today

Iott Insurance has been a part of southeast Michigan for over 50 years. We can help you plan your insurance needs and find you the right policies or plans to protect you.

Get a quote today!

Or you can visit one of our three offices in southeast Michigan:

Blissfield, MI – (517) 486-4381

Lambertville, MI – (734) 854-4688

Petersburg, MI – (734) 279-2111

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