Understanding how much health insurance will cost is important when making an informed decision about its purchase for yourself or your family. Understanding key terms like premium, deductible, copayment and coinsurance will enable you to select an affordable plan within your budget.
Deductibles represent the amount that must be paid each year before your health insurance coverage begins to kick in, and can differ widely between plans.
A health insurance premium is the monthly fee paid to your health insurance provider in exchange for continued coverage and is usually the main expense associated with having coverage through work or purchasing their own policy.
Your premium amount depends on a number of factors, including plan type and age. For instance, younger individuals tend to visit doctors less often than their elders, thus leading to lower premiums overall.
Additionally, the Affordable Care Act (ACA) offers premium tax credits that help lower costs when purchasing Marketplace plans from Bronze to Platinum levels of plans in the Marketplace. These credits reduce monthly payments for enrollees.
In 2020, the average full-price premium for Marketplace plans averaged $575/month; this may differ depending on factors like metal level, insurer, geographic area and age of enrollee. Of those enrolled in a Marketplace plan at full price in 2020, approximately 86% received subsidies that helped reduce their premium payments significantly.
A deductible is the upfront payment you make before your health insurance starts covering expenses such as doctor’s visits or prescription refills. Determining your deductible amount is an integral component of health plans as it can impact how much money is spent over time on healthcare services and expenses.
Deductibles vary by policy. Individual policies could have anything from zero to several thousand dollars for their deductible, while family plans might need even higher deductibles.
If you are healthy and do not require multiple medical needs on an ongoing basis, a lower deductible plan might make more sense than one with higher deductibles that requires you to spend a large sum out-of-pocket before receiving any coverage from insurance.
Many plans provide for an annual deductible, coinsurance percentage and out-of-pocket maximum amount that resets at the beginning of every policy year.
Copayments are fixed amounts that you pay when accessing healthcare services, such as doctor visits or prescription drugs. They tend to be lower than deductibles and out-of-pocket maximums; however, this varies among insurance providers.
HMOs and PPOs are two popular health insurance plans which typically require copayments.
Most health insurance plans also establish copayment amounts for specific office visits, like doctor’s visits or emergency room visits. Some plans also set copayment amounts for medications prescribed to you such as $10 for generics and $25 for preferred brand-name prescriptions.
Copayments can help manage health care costs. But before enrolling in any health plan, it is essential that you understand their application.
Coinsurance refers to a percentage of total costs that is split between you and your health insurance provider; typically it applies to doctor visits, lab work and medications.
Your health insurance provider may apply different coinsurance rates for in-network and out-of-network services, as well as prescription drug tiers.
Coinsurance rates depend on both your type of plan and monthly premium; plans with higher premiums generally have lower coinsurance.
How often you visit the doctor can also have an effect on how much coinsurance you owe; plans with higher monthly premiums may impose greater coinsurance on routine visits.
Most plans require coinsurance payments after reaching their deductible; however, certain plans provide “100% after deductible coverage,” meaning that once your deductible has been met, your provider will cover 100% of all medical expenses without further copayment payments.