deductible vs out of pocket

Understanding health insurance terminology can help you choose the right plan for yourself or your family. One issue many people find confusing is the difference between a plan’s deductible and out-of-pocket limit, both of which represent points at which the insurance company pays for all or some of your care. Why are the amounts often different, and how does each affect health care costs?

Deductible & Coinsurance

In addition to your monthly premium, your deductible is the amount of money you have to pay out-of-pocket for covered medical expenses before your insurance company starts helping with costs. The amount the insurance company pays after you meet the deductible will depend on your coinsurance percentage.

Let’s say you purchase a health plan with a $3,000 deductible and 20% coinsurance. You receive two procedures during the year you have the plan, one that costs $1,000 and another that costs $2,500. You would have to pay the full $1,000 for the first procedure plus $2,000 toward the second procedure. After that, you would only have to pay $100 (20%) of the remaining $500. Your insurance company would pay for the rest. In the event you need additional health services later in the year, you would continue to pay 20% of the costs.

The deductible, therefore, does not represent the maximum amount you have to pay before an insurer pays for everything. It represents the total amount you must pay before the insurance company helps you pay for a percentage of your care. If you’re looking for the maximum amount of money you will ever pay for care in a given year, that’s when you should pay attention to your plan’s …

Out-of-Pocket Limit/Maximum

This is the maximum amount of your own money you will have to pay for care during the year. Think of the out-of-pocket limit as your deductible + coinsurance + copayments (if your plan has them) up to a total dollar amount. The only costs that don’t count toward your out-of-pocket limit are premiums, which you must continue paying to maintain your coverage. Per the Affordable Care Act (ACA), no health plan sold on the Health Insurance Marketplace in 2017 can have an out-of-pocket limit in excess of $7,150 for an individual or $14,300 for a family.

Additional Considerations for Deductible vs. Out-of-Pocket

Now you understand the difference between deductibles and out-of-pocket limits; so, what’s next? How can these concepts help you choose the right health plan?

Typically, plans with low deductibles and out-of-pocket limits will also have higher premiums. These plans might make sense if you anticipate needing lots of care. On the other hand, if you don’t consume much health care, choosing a higher deductible/out-of-pocket limit could lower your overall costs.

Whatever the case, talking to a licensed insurance agent will answer many of your cost-related questions. Contact HealthMarkets Insurance Agency to learn more about deductibles, out-of-pocket limits, and whether you qualify for savings on your health plan. Our service is free to you and there’s no obligation. Call (800) 429-5058 to get started!

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References

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2017-oop-caps.aspx

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