When you’re shopping for health insurance, you’ll want to be sure you understand what each term means. Here’s a guide to the basic elements of health insurance:
Premium
The premium is the amount you pay for health insurance. If your employer offers a group health plan, they may choose to pay the premium for you. If not, it will be up to you and your family members to make sure that this expense is taken care of monthly by paying the premiums on time.
The Affordable Care Act (ACA) requires insurance companies offer at least one level of coverage that costs less than 10% of an individual’s income—this is known as bronze tier coverage. The lower-priced silver and gold tiers have higher premiums but provide more benefits than bronze plans do. Platinum plans are most expensive but provide comprehensive benefits and other extras like dental care or vision coverage
Deductible
Your deductible is the amount you pay before your insurance kicks in. For example, if you select a plan with a $2,500 deductible and then get injured in an accident requiring treatment, your insurance company would pay for everything not covered by that first 2,500 bucks. It might sound like common sense—the higher your deductible is, the lower your monthly premium will be—but it’s also important to think about whether or not there are other factors (like income) that might make a high deductible unfeasible for you.
For example: If someone were making only minimum wage and earning around $15k per year but still wanted health insurance coverage because they wanted peace of mind while traveling abroad or visiting family on holidays (i.e., they don’t have access between jobs), putting them on a plan with a low premium but high deductibles could leave them with no way to actually afford their medical expenses once the bill comes due
Copayment
Copayment is the amount of money you pay for certain health care services. It’s typically a fixed amount and can be a flat dollar amount or a percentage of the total cost. Copayments are often used for prescription drugs, doctor visits, and other non-emergency services.
Coinsurance
Coinsurance is the amount you will pay for a service, usually a percentage of the total cost. It is usually calculated as a percentage of the total cost of the service and ranges from 10 to 30%, depending on your plan. The higher your coinsurance is, the lower your monthly premiums will be.
Out-of-pocket maximum
An out-of-pocket maximum is the total amount you will have to pay for covered services during a given period of time. It may be a yearly limit or lifetime limit. For example, if you’re insured under a plan that has an annual out-of-pocket maximum of $3,000 and you reach that amount in one year, your insurance company will cover all expenses above $3,000 for the rest of the year (and possibly into the next).
These are the most important terms to know about health insurance
The four terms that you need to know in order to understand health insurance are premium, deductible, copayment and coinsurance.
The premium is the payment that you make each month to the insurance company for your coverage. It can be either fixed (you pay the same amount every month) or variable (your monthly payment increases as you get older).
A deductible is the amount of money that you will have to pay out-of-pocket before your health plan begins paying its percentage of covered services. For example: If a person has a $3,000 deductible and he goes for an MRI scan that costs $4,000 but his health plan covers 80% of his medical expenses at 100%, then he would need to pay $2,400 upfront ($4,000 minus 20% from his plan’s 80%). He may then file this expense with his insurer who will reimburse him 80 cents on every dollar spent up until he reaches his total out-of-pocket maximum (see below). In other words: Out-of-pocket expenses are those which must be paid by patients before their insurance kicks in; once their total liability reaches their out-of-pocket maximum they face no further financial obligations under the policy until their next year begins.
Coinsurance refers to what percentage an insured person must pay after meeting their deductible each time they receive medical treatment during a given year (usually between 50% and 75%). For example: If someone has paid all $3000 towards deductibles during one year under this type of policy then she might have saved herself some money but she still faces significant outlay when paying for other items such as prescription drugs or Xrays etc., which could add up quickly depending upon how often these things happen within any given year!
Conclusion
We hope this article has helped you understand some of the basic elements of health insurance. We know that it can be confusing, but we also think it’s important to know what your coverage really covers and what it doesn’t.
