Healthcare is critical to our well-being. Yet, in America, we do not have tax-funded healthcare for all; instead, our healthcare is largely shaped by the insurance industry, and as such can be expensive. Unfortunately, this means that making decisions about our healthcare also means making decisions about our finances.
To make informed decisions, we need to be able to understand what services are and are not covered by our health insurance. However, the landscape of insurance is complex.
One complicating factor is that no two insurance plans are exactly alike, even if they fall under the same insurance provider, so it is important to understand the features of your plan specifically.
Another point to remember is that insurance plans typically reset once per year. For many insurances, plans reset on January 1st, but this is not true of all plans, so you want to make sure you know when your plan resets. Your insurance plan and benefits will also reset anytime you switch insurance coverage, for example when you change jobs or move on to a partner’s insurance plan, even if it is under the same insurer as your previous coverage.
Additionally, the language of health insurance– including terms like deductibles, copays, and coinsurance– leaves many feeling overwhelmed.
In the remainder of this post, I’ll explain common insurance terms to the best of my own understanding. Please note: I am not an insurance professional; I have learned about insurance features in my work as a healthcare provider and as a policyholder. In addition to what I describe here, I have included references at the bottom of this article to help you learn more.
Understanding how insurance– and most importantly, your specific plan– works will empower you to make informed decisions about your healthcare choices.
Deductibles
A deductible is the amount of money you must pay out of pocket before your insurance kicks in. For example, if your health insurance plan has a $2500 deductible, you’ll be responsible for paying the first $2500 of covered medical expenses. After reaching this threshold, that means you have met your deductible, and at that point your insurance will start splitting the costs of your healthcare services with you.
It’s crucial to carefully review your insurance policy to determine what expenses count towards your deductible, because this varies by plan. Typically, such expenses would include services like medical procedures, hospital stays, and prescription medications, but not all services may apply, and if you have a copay, the copay amounts typically do not count toward meeting your deductible.
Copays
Not all insurance plans include copays, but they are very common. You will typically see copay amounts listed on your insurance card if you have a copay. A copay is a fixed amount or percentage that you pay out of pocket for certain healthcare services that is a fraction of the overall cost of the service, and you would pay this once per appointment. The amount may differ by the type of service. The most common types of service for which you might have a copay are visits to your Primary Care Physician (PCP), a Specialist (usually any other kind of non-emergency healthcare provider), and the Emergency Room. Copays are for the appointments themselves, not for other procedures that may occur as part of that appointment.
If your insurance plan includes copays, that means your insurance will require you to only pay your copay amount– not additional expenses– for certain appointments, even before you meet your deductible. However, this varies by plan, and some plans include coinsurance (see below) instead of a copay. What does it mean to pay a copay? Say you have a mental health visit that carries a fee of $200. Even though your deductible (the amount you have to pay annually before your insurance splits costs with you) in this example insurance plan is $2500, if your copay for a mental health provider (this falls under Specialist) is $30, you would only pay $30 for your mental health visit, and your insurance would cover the remaining $170.
But remember, even though they sound similar, copays and coinsurance are two different features. If your plan includes coinsurance instead of a copay, different rules apply– see below.
Coinsurance
Not all insurance plans include coinsurance. Coinsurance refers to the percentage of costs you will pay for services after meeting your deductible.
Looking at the same example as before, say you have a mental health visit that carries a fee of $200. If your plan has a $2500 deductible and a 20% coinsurance rate, you would have to pay the full $200 out of pocket for that mental health visit, until you have paid $2500 toward your healthcare expenses (this would include all covered healthcare expenses) during that plan year. Once you have paid a total of $2500 across all of your healthcare expenses, meeting your deductible obligation, then your coinsurance kicks in, and all future mental health visits during that plan year would cost you only $40 (20% of that $200 fee), with your insurance paying the remaining $160.
Out of Pocket Maximum
Even once you’re done paying your deductible for the year, you will still owe your copay or coinsurance amounts until you’ve met your plan’s maximum out-of-pocket limit for the year. Once you reach the maximum out-of-pocket limit, your insurance will fully cover all other covered services during the remainder of that plan year (you still need to know which services count as covered services by your insurance plan).
Secondary Insurance
Secondary insurance, also known as supplemental or dual coverage, comes into play when you have more than one insurance plan. This might happen if you have coverage through your employer and your partner’s employer, for example. In such cases, one insurance plan is your primary plan, while the secondary insurance may cover some of the remaining expenses.
It’s important to understand the coordination of benefits between your primary and secondary insurance. The primary insurance pays its share first, and the secondary insurance kicks in to cover any remaining eligible expenses.
It’s also important to note that not all healthcare providers will process secondary insurance, which means you will have to pay out of pocket for any costs not covered by your primary insurance, then submit bills to your secondary insurance in order for them to reimburse you for your portion of the costs that are covered by them.
I do not process secondary insurance in my practice, so my knowledge on this topic is limited, but here is an article that gives a more in-depth explanation.
Tips for Navigating the Health Insurance Maze
Now that you are equipped with understanding of common terminology relating to health insurance, make sure to review your insurance card and, most importantly, your policy documents. Your policy documents will be the final word regarding the specifics of your coverage and any limitations on coverage. If ever you have questions or need clarification, call the Member Services phone number that you can usually find on the back of your insurance card. Have your insurance card handy because you will need to input information from it to be routed to a representative that can help you.
Conclusion
Navigating the world of health insurance is challenging. However, armed with knowledge and a clear understanding of your policy, you can make informed decisions when it comes to both your health and financial well-being. When you are exploring insurance plan options, take the time to read about the different coverages offered and ask questions about anything you don’t understand, so that you can select the best healthcare coverage available for your personal needs and circumstances.
At a minimum, here are questions you want to make sure you know the answers to:
When does my plan year begin?
What is my deductible?
Do I have a copay or coinsurance? If copay, what are my copay services and rates? If coinsurance, what is my percentage?
What is my maximum out of pocket limit?
I hope this has helped you feel more confident in navigating the health insurance maze. For more information, see the references I’ve included below.
References:
https://www.bcbsm.com/individuals/help/how-health-insurance-works/deductibles-coinsurance-copays/
https://www.verywellhealth.com/deductible-vs-copayment-whats-the-difference-1738550
https://www.forbes.com/advisor/health-insurance/deductible-vs-out-of-pocket-maximum/#
Michelle Lange, Psy.D., is a Licensed Clinical Psychologist and the owner of Relaction Therapy, providing mental health and wellness consultation services. Visit relaction.us to book a session or consultation appointment.
Image credit: Vlad Deep via Unsplash
