Unless you are familiar with health insurance then the costs involved in a health insurance plan may seem to be a little complicated and many people are surprised that, having spent what seems like a small fortune, they find themselves faced with a bill the first time they submit a claim. So before you are landed with a substantial medical bill therefore, it is a good idea to take a moment to learn just what goes to make up health insurance plan costs.

The first and most obvious cost is the monthly premium or, in some cases, the quarterly premium or annual premium. If you belong to an employer’s or union group plan then you will usually be required to pay only a percentage of the premium and this will normally be taken directly from your pay check.

The majority of health insurance plans also include an annual deductible which is a sum of money that you will be required to pay before your insurer starts to pay out on any claims. Thus, with an annual deductible of $1,000 you will need to meet the first $1,000 of any medical bills every year before the insurance company will start paying out. You might be familiar with the principle of paying a deductible from your experience with car insurance policies and, if so, will know that the more the deductible on your policy the lower your premiums will be. Also, if you have a family health policy then this will typically include multiple deductibles for the individual members covered under the plan.

Most medical policies will also include a co-payment which is a fixed sum of money that you will have to pay towards every medical bill. Exactly how much you will have to pay in co-payments will depend largely on the type of policy you have. For example, co-payments on HMO plans are normally lower than those on indemnity plans. In addition, the co-payment will also vary between different types of medical service and, if you are a member of an HMO plan, will normally increase if you are treated outside of the HMO network.

In those cases where no co-payment is required you will normally find that this is replaced by co-insurance which is similar and is a sum of money, this time expressed as a percentage, which you will once again have to pay towards every medical bill. A common co-insurance ratio is 80/20 indicating that the insurance company will meet 80% of any medical bill while you pay 20%. As for co-payments, co-insurance will generally rise if, as an HMO plan holder, you seek treatment outside of the HMO’s network. In this event you may also find that, when a claim exceeds what the insurance company considers to be ‘reasonable and customary’, you could be required to pay the additional cost.

By this time you will realize that comparing health insurance policies is about considerably more than just comparing plan premiums. As a consequence, it is critically important that you read the details of any medical insurance quote most carefully and that you avoid the frequent temptation to simply choose the plan which has the smallest monthly premium.

If you want to keep costs low and are in an HMO plan then you should attempt to stick inside the HMO’s network and, when you do feel that it is necessary to go outside the HMO’s network, then compare actual treatment costs to what the insurance company considers to be ‘reasonable and customary’ before undergoing treatment.

You can also keep your costs down on many plans by raising or lowering your deductible and by opting for higher or lower co-insurance. Just how this can be done is beyond the scope of this short article but is a question of balancing the different costs involved against the likelihood of having to make a claim against the policy.

This might seem a little complicated but a sound understanding of the different costs that make up your total expenditure is very important when it comes to getting a good deal and finding the best low cost medical insurance plan.

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Filed under: Health Insurance

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