Sometimes while choosing your health insurance plan, you must have come across words like premium, co-payment, out of pocket maximum and deductible. You may have wondered what they mean and what is the best plan for you, considering all these buzz words. Well, you are at the right place to get all the information you need. Firstly, you must know what healthcare insurance is, and why do you need one? Imagine that you are sick and need to see a doctor. You get a $200 bill which you may be able to afford. However, imagine that in case of an unforeseen event like an accident or a long-term health condition, you are required to go through regular appointments and procedures, can you afford it every time? This is where healthcare insurance can help you save a good amount of money that you can rather spend on your quality lifestyle. Though you do not get an impression that you will not have to pay altogether, but you will certainly pay far less depending on your plan. Insurance companies have long term commitments with doctors and hospitals that help them get reduced cost on covering your healthcare as well as earning something themselves out of it. At the end of the day, it is a win-win situation for you as well as your healthcare insurance company.
You may have read many buzzwords in various healthcare insurance places such as the one provided by United Healthcare. These catchphrases are part of almost every plan, and they differ depending upon the company you are taking it from or the plan you select as per your needs. Knowing the meaning of these words and the costs associated with them will help you select the most optimum plan to fulfil your family’s healthcare requirements. Here is a list of things you must be aware of before selecting a healthcare insurance plan.
Premium
Think of your insurance as a monthly membership to a club. Every month, you have to pay a certain amount as a membership fee to remain a member of the club. That amount in insurance language is called a premium. How much you pay as a premium also depends on the plan. It is usually an inverse proportionality with the amount you have to pay at the time of getting healthcare. Premium has to be paid to keep your insurance active. They have a due date as well as a grace period beyond which the company might be at liberty to cancel your subscription.
Preventive Care
With your premium, you may be able to get preventive care for free. Preventive care is usually a regular checkup or immunization and screening from diseases that one has to go through to avoid contracting them. However, the premium does not cover the costs of when you need healthcare in the circumstances other than preventive care.
Deductible
A deductible is the minimum amount of money you have to pay before the insurance company starts sharing your cost. The deductible is quite different from premium and has to be paid to start receiving benefits of the insurance plan. On the other hand, the premium has to be paid irrespective of whether you need any benefit from insurance or not. The deductible is reset to zero at the start of every year, and hence you have to pay a new deductible for the next year. Some people prefer to keep the premium low and deductible more which they pay at the start of the year just to be able to receive insurance benefits as much as possible.
Co-pay and Co-insurance
After you have paid the deductible in full, you enter a stage where your insurance company shares the cost for the healthcare benefits. In this setting, whatever you pay is called co-pay or co-insurance. Co-pay is the fixed amount of money you have to pay for certain types of services while co-insurance is the percentage cost you have to share. So, if you have an 80-20 plan, your insurance provider will pay 80 per cent of the cost while you have to pay the rest.
Out-of-pocket limit
Your insurance provider keeps track of how much you are co-paying, and every insurance plan has an out-of-pocket limit. The out-of-pocket limit is the accumulation of co-payments, co-insurance, and deductible to a certain limit, beyond which you will not have to pay a single penny for your healthcare. Once you have reached your out-of-pocket limit that is part of the plan, your insurance company covers all your healthcare costs. Just like your deductible, your out-of-pocket limit is reset at the end of the year.
Annual Coverage Limit:
However, your insurance provider sets an annual coverage limit as the amount of money that it can pay at the very maximum for your healthcare. Once you have reached this limit, you are again on your own to pay for your expenses till the end of your year.
A study has shown that a healthcare plan can be a matter of life and death, while another one shows that those without a plan had a very poor screening record in preventive care.
In a nutshell
So, there are three stages of healthcare insurance. In the first stage, only you have to pay for your healthcare until you have paid the deductible, which is the minimum amount you have to pay before your insurance kicks in. Then in stage two, you and your insurance provider share the cost in the form of co-pay and co-insurance. In stage three, when you reach the maximum out-of-pocket limit, your insurance company has to pay all the amount till you reach the maximum coverage limit. However, not everything is included in the healthcare plan, and these special circumstances are called exclusions that the insurance provider informs you before you pick a plan. Other than this, you have to pay the premium every month to keep the insurance active. Now, it’s up to you to decide what kind of plan you need for yourself depending on your healthcare requirements and affordability. You have to make a guess about the number of visits you might need to a doctor depending on your history and the amount you can pay every year. However, you may need to make some room for the unforeseen as you never know what life might bring you.
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