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Understanding Your Health Insurance Out Of Pocket Costs

It might seem great to be able to buy a health insurance policy that would cover each service at 100%. The problem with a plan like this is the monthly premiums would be very high.

Consider this. When you buy auto insurance, the policy does not usually cover flat tires or dead batteries. A policy like that would be too expensive. Plans with very high premiums may cover services that are just essential. They may also cover services that you will never use at all. In the end, you pay a much higher premium for access to these services that are not really worth your while. A solid health insurance plan that covers all of the essentials but not necessarily everything under the sun might be the better and more economical choice.

To prevent moral hazard and the inefficiency of care, most health insurance plans have a built-in process to limit the use of marginal services. HMO plans are one example of major medical plans with very tight cost control. One of these constraints comes in the form of "out-of-pocket costs". These costs are what you pay out of your own pocket even though you already have health insurance.

When out-of-pocket costs are too low, the health plan becomes expensive and inefficient. If out-of-pocket charges for service you do need is too expensive, you will not be happy with your coverage either. So we need to find health insurance that is best for us. That includes, of course, a monthly premium that fits into a realistic budget. For these very reasons, it is very important to always be informed about how much out-of-pocket cost you are expected to pay with any health insurance policy.
Understanding Your Health Insurance Out Of Pocket Costs


Out-of-pocket costs come in different flavors, the most common of these being in the form of a "Deductible". This simply means that there is a certain dollar amount that you have to pay for covered health expenses before your health insurance kicks in and covers the rest. Each specific service covered under your health insurance policy will have varying deductibles. For example, you might have to pay $5 for each prescription or there might be one deductible for whatever services you receive during a whole year.

Sometimes, when you have to pay a deductible every time you use a service, insurers call that a co-pay. Insurance policies with higher deductibles have a much lower premium and if an insurance policy has an extremely high deductible, it is sometimes dubbed as "Catastrophic Insurance".

"Elimination Periods" are like deductibles but instead of cash, they are counted in days. Some health plans use this in the event of hospital care and will not begin paying your stay at the hospital until a certain number of days have passed.

"Coinsurance" is the money you are expected to pay out-of-pocket for health care even after a deductible has been paid. Some health plans will tell you that certain services will require 20% Coinsurance. What does this mean? It means you will need to pay twenty percent of the costs yourself.

By accepting a plan with deductibles, you may be able to find premiums you can afford.

by: Marilyn Katz




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