We get it! Insurance can be confusing. When it comes to evaluating which insurance plan is best suited to your needs, you'll come across concepts you need to understand: premium, deductible, coinsurance, and copayment.
Let's take a closer look at what these terms mean, how they work together, and how they differ.
Premiums
What is a premium?
Let's start with one of the most well-known and basic concepts when purchasing insurance: the premium. Simply put, this is the amount you pay for your health insurance coverage. A premium is paid to an insurance company in exchange for its services and coverage.
When should I pay it?
It must be paid regularly (either monthly, bi-monthly, quarterly, or annually) to validate your insurance coverage and keep your policy active. To establish it, various factors are taken into consideration, from the desired coverage and the duration of the contract to the insured's risk. The premium also includes management fees, taxes, and other costs.
Is the amount fixed?
Depending on the insurance company, the premium may increase, decrease, or remain fixed each year. Furthermore, since it is an obligation that you, the insured, must fulfill, there is a grace period before the coverage is suspended if payment is not made on time.
A premium is separate from any deductible, coinsurance, or copayment amounts owed for care provided. These are called out-of-pocket expenses: your healthcare expenses that aren't reimbursed by insurance. Let’s take a look at them.
Deductibles
What is a deductible, and how does it work?
A deductible is the amount you pay each year for most eligible medical services or medications before your health plan kicks in. For example, if you have a $1,000 annual deductible, you'll have to pay the first $1,000 of your total medical costs before your plan will help you pay.
The deductible is not included in your monthly premium. After paying a deductible, you continue to pay your monthly premium, but medical costs are covered (regardless of copayments or coinsurance charges).
How do I choose my deductible amount?
If you're normally in good health and don't need expensive medical services throughout the year, a plan with a higher deductible and lower premium might be a good option for you.
On the other hand, if you have a medical condition that will require constant care, or a child who plays sports, a plan with a lower deductible and a higher premium that pays a higher percentage of your medical costs may be better for you.
Coinsurance
What is coinsurance?
After you reach your deductible for the year, most health insurance plans require you to cover a percentage of your care costs. This percentage is called your coinsurance amount and is specific to your health insurance plan.
How can I calculate my coinsurance costs?
The cost of your coinsurance depends on your health plan. Some health plans have an 80/20 coinsurance policy. This means your coinsurance is 20%, and you pay 20% of the cost of your covered medical bills, while your insurance plan covers 80%.
For example, if you have a 20% coinsurance amount on your plan, that means that for every $50 owed for your medical care, you'll pay $10 and your insurance will pay $40.
Copays
What is a co-payment?
A copayment is a fixed charge you pay when you visit the doctor or fill a prescription. For example, if you hurt your back and go to see your doctor or need a refill for your child's asthma medication, the amount you pay for that visit or prescription is the copayment.
Do I always have a co-pay?
Not necessarily. Not all plans use copayments to share covered expenses. Additionally, some services may be covered without you having to pay an out-of-pocket cost, such as annual checkups and some other eligible preventive care services.
When do I have to pay a copayment?
A co-payment is due at the time of service.
Differences Between Deductibles and Copays
A deductible is the amount you pay before your health plan begins to share the costs of covered services. If your plan includes copayments, you pay the fixed copayment charge at the time you receive the service. The table below provides a summary of their key differences.
Conclusion
You should be clear about how much you would use your insurance each year, especially when it comes to health. Being healthy and having sporadic, routine doctor visits is not the same as suffering from a chronic illness, in which case it may be worth paying a higher premium and less in deductible or coinsurance.
Regardless of the options available, the most important thing is to have insurance that supports you in the most difficult times. Most insurance plans usually include deductibles, coinsurance, and copays, while some don’t. So you have to review your policy details so you know what out-of-pocket expenses you'll have.
Need a health insurance plan? Contact us to get more information about the M-KOPA health cover, or Email Us: info@m-kopa.com
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