When it comes to health insurance, there’s a lot of unfamiliar vocabulary. Words like:
- out-of-pocket maximum
What do they mean?
Copays, coinsurance, deductibles and out-of-pocket maximums are all examples of what’s called “cost-sharing.” And cost-sharing means what it says: it refers to ways that you and your health insurance plan share the costs of your medical bills.
Let’s go through some of the most often-used forms of cost-sharing one at a time.
When you go to see the doctor or to the hospital or another health care provider, some plans have you make a copay to the provider. It’s usually a small amount, though the amount might vary (for instance, $10 to see your Primary Care Provider (PCP), but $25 to see a specialist).
Another way the cost of medical bills can be split between you and your insurance plan is coinsurance. It’s like a copay, but spelled out in percentages rather than dollar amounts. So, for certain medical bills, the plan might pay for, say, 80% of the cost, while you pay the remaining 20%.
The deductible is a dollar amount that, once you’ve paid it in a given year, flips the switch for your health insurance plan to start paying their share of your bills.
For example, say you’re health insurance plan has a deductible of $1000. That means that, for the first $1000 worth of medical bills, you’re responsible to pay all of it, 100%. But, after that, your plan’s copays and coinsurance come into effect, so that now, when you see the doctor, you only pay a small copay, and for other medical bills you’re only responsible for, say, 20% of the bill, while your health insurer picks up the rest.
Keep track of what your plan’s deductible is, and how much of it you’ve paid. You can find this information on any Explanation of Benefits (EOB) that your insurer sends you. Learn more about how to read an EOB.
Your plan’s out-of-pocket maximum (it’s sometimes called “maximum out-of-pocket” or “MOOP”) is like a deductible that kickstarts an even higher level of payment from your health insurer.
Suppose that your plan has a $10,000 maximum out-of-pocket. Once you’ve paid $10,000 out of your own pocket for your medical bills (including copays and coinsurance, but not premiums), your health insurer pays for any more bills for the rest of the year.
So, really, when you’ve spent up to the out-of-pocket maximum amount, cost-sharing ends: no more copays or coinsurance from then until the end of the year, your health insurer picks up 100% of your medical bills.
So, where do premiums sit in all this? Monthly premiums are not included in cost-sharing. They’re basically the monthly fee you pay to be part of a health insurance plan. In other words, premiums are what get you through the door and into a cost-sharing agreement with a health insurer. Even if you’re met your deductible or out-of-pocket maximum, you still have to pay all of your premium every month.
Check Your Cost-sharing
One of the main ways health insurance plans differ is in copays, coinsurance, deductibles and out-of-pocket maximums. Make sure to look for all of these when learning about a plan, and compare them to what you find in other plans.
For example, Virginia Premier offers a variety of Medicare Advantage plans, with different cost-sharing levels.
And if you’d like to know more about how health insurance helps you with your medical costs (and to stay healthy), read more about health insurance and why it is important.