What is a deductible anyway?
When it comes time to pay your health care bills do you sometimes feel confused or overwhelmed by all the different fees and plan types? If you answered yes, you’re not alone. Do you understand the difference between a co-pay versus co-insurance for health care services provided? Are you familiar with deductibles and how they differ from out-of-pocket maximums? These questions may be anxiety inducing, but don’t despair! With just a little bit of homework, you can be on top of your health care expenses in no time.
Before we dive in, let’s define some of the key players.
Patient: The person seeking medical services.
Facility: The place where a patient seeks care. This could be a clinic, a hospital or an urgent care center.
Care provider: The person who delivers care to the patient. This could be a primary care physician, specialist or hospitalist.
Health plan: This is your insurance provider. Common types include: Aetna, Blue Cross, Blue Shield, etc.
A co-pay (or co-payment) is a fee that the patient pays the facility — in addition to the amount that the health plan pays. It’s a flat rate for the service you can expect to pay each time you visit a health care provider. A common instance of this would be a $25 co-pay for an office visit with your primary care physician. For example, if the contracted rate between your health plan and the clinic is set at $150, you pay $25 and the health plan would pay the clinic the remaining balance of $125. If you incur any additional fees while you are at the doctor (lab tests, x-rays, blood work, etc.) you may be charged an extra fee, but this is separate from your co-pay.
Co-insurance is a fee you pay to your clinic in addition to the amount your health plan pays. It’s a percentage of the total cost of the service. Co-insurance is dependent upon the rate contracted between the health plan and the clinic. A common example would be a 20 percent co-insurance for an office visit with a primary care physician. If that rate has been set at $150 total, your responsibility for the co-insurance would be $30 (20 percent of $150). The health plan would then pay the remaining balance of $120 to the physician’s organization.
The deductible is the amount that the patient pays before an insurance company will make a payment. For example, your health insurance might have a $2,500 annual deductible, so you’d have to pay all expenses until that $2,500 deductible is met. Once you’ve paid $2,500 in expenses, the insurance company will then begin making payments. A co-pay or co-insurance may still apply even after the deductible is met, but you wouldn’t be responsible for the full cost of care. For example, if you undergo a $3,000 surgery that is covered by your health plan, you will pay $2,500 towards your deductible. Your health plan is then responsible for the balance of $500 still owed to your care provider.
The out-of-pocket maximum is the maximum amount you have to pay during a policy period (usually a year) for health care services. Your out-of-pocket maximum is comprised of everything paid toward your deductible, plus all co-payments or co-insurances for care provided after your deductible has been met. Once the out-of-pocket maximum has been met, the health plan begins to pay 100 percent of the allowed amount for covered services.
So, are things a little clearer now? It’s wise to understand these fees before you start accruing them. That way, you won’t dread seeing those health care bills show up in your mailbox. Stay tuned for more content to empower you as an informed patient.