What You Pay: Part 3 – How Your Health Costs Stack Up
If you’ve been following along with us in our What You Pay series, you’ve learned about premiums, copayments, deductibles, and coinsurance. Now that you know more about what they are, let us help you figure out how all of these stack up.
Which one do you pay first? When do you stop paying one and start paying another? We’ll help you figure that all out.
A premium is the amount of money you pay your health insurance company to have their health insurance coverage. So, when you think about all of your healthcare costs, this is the very first one you pay. You pay a premium just to have the coverage; it’s not tied to a specific healthcare event.
When You Pay: You usually pay a premium out of each paycheck, or monthly if you’re buying your own health insurance. If you get insurance through your employer, you’re sharing the cost of your premium with your employer.
Healthcare deductibles work just like your car insurance deductible. Your deductible varies based on your plan. Consumer Deductible Healthcare Plans (CDHPs) are becoming very popular. These plans have high deductibles of usually $1,000 or more.
When You Pay: If your plan has a deductible (some don’t), you pay your whole deductible before your insurance kicks in their portion. Because you have insurance, you will usually receive discounts on your care. Even though you’ll have to pay out of pocket, it’s not the same as not having insurance at all.
A copayment is a set dollar amount you pay for a specific healthcare service. Your plan determines what your copayments are. Most healthcare providers make you pay your copays at the time of service.
For example, your copays may look like this:
Regular office visit: $25 copay
Visit to a specialist: $45 copay
ER Visit: $200 copay
Copayments don’t count toward your deductible. So, even though it’s money you’re spending toward your healthcare, you can’t add those dollars to your deductible.
When You Pay: You pay a copayment anytime you go to the doctor, see a specialist, go to the ER, etc. Check your specific plan documents to know exactly when your plan requires a copayment.
Once you’ve paid your premiums, your copayments, and have met (or paid) your deductible, then your coinsurance kicks in. You and your health plan share coinsurance; that’s where it gets its “co-“ prefix.
Coinsurance is the percentage you pay for covered healthcare services after your deductible has been met. You’ll often see coinsurance listed in groups of two numbers, like 70/30. That means your health plan pays the first percentage (70% in this example), you pay the latter (30%).
Note: Sometimes, you’ll have a procedure that costs a lot of money. Part of that procedure will count toward your deductible, while coinsurance kicks in on another part of that care. See last week’s example of how this happened to Al.
When You Pay: You pay your portion of your coinsurance after you’ve met your deductible.
We hope this helps you better understand what your healthcare costs are and when you should pay what.
Are there other healthcare terms that are confusing to you?