Choosing the right health insurance is one of the most complicated and important financial decisions you will make. There are so many choices out there, and it pays to be familiar with the various terms, as well as how they are written into a specific plan. Even within plans from the same company, there are differences in how deductibles and coinsurance amounts are applied to the yearly out-of-pocket maximum.
Allowable Amounts
If you have a Preferred Provider plan (PPO), the hospitals, doctors and other providers in the PPO network have signed a contract stating that they will accept the insurance company's allowable amount. This is not the amount that is billed. The allowable amount is based on a complicated formula that incorporates the average provider bill as well as several other factors for a period of time for each particular service. The amount you are responsible for if you go to a preferred provider is the allowable amount, not the billed amount. This is the case even if the charges are applied to your deductible or when you must pay part of the charges as a co-payment.
Deductibles
A deductible is the amount you will pay before your insurance begins paying a certain percent toward your health bills. If you have a family plan, there are usually individual and per family deductible amounts. It is important to understand what will be applied to your deductible and what will not. If you submit a claim for doctor services and it is denied as not covered under your plan or not medically necessary, the amount you pay the doctor will not be applied to your deductible. When services are denied, some providers will write off the difference between the billed and allowable amount, and some will not. When the service is covered, the allowable amount is applied to your deductible. Some newer PPO plans allow two to three doctor visits per year, for which you simply pay a copay. These visits may or may not be applied toward your deductible; you must read the fine print in your contract. Once your deductible has been met, your plan begins paying a percentage of the allowable amount, usually between 75 percent and 90 percent, while you pay the corresponding coinsurance percentage.
Out of Pocket Maximums
The coinsurance amounts you pay accrue toward the yearly out-of pocket-maximum. If you have a family plan, there are usually both individual and family maximums. Rules on what applies to the out-of-pocket max and what is not included can get quite complicated. You must read the plan you are considering carefully, because sometimes the deductible is included in the out-of-pocket maximum and sometimes it is in addition to the out-of-pocket maximum. The out-of-pocket max is the amount for which you are responsible each year. Most PPO plans have a separate in-network and out-of-network maximum, with the out-of-network maximum being higher. If you have met your in-network, out-of-pocket maximum and access services from a non-participating provider on a non-emergency basis, both your coinsurance amount and out of pocket can be higher.
Understand the Plan
There may be certain covered services whose charges do not count toward the yearly maximum. This should be clearly spelled out in the literature you receive. Look for statements such as "prior authorization co-payments do not accumulate toward your out of pocket maximum". Even after you have met the maximum out of pocket, you would still be required to pay a co-payment when you access these noted services. On some plans, there are out-of-pocket maximums for certain services such as mental health that are in addition to the regular out-of-pocket maximum. It is extremely important to understand these aspects of your current plan, or when choosing a plan so you can find a plan that suits your family's needs.
Analyze Coverage
If two or more members of your family are involved in an accident and end up in the emergency room, subtle variations in yearly-maximum verbiage can mean a difference of thousands of dollars. Analyze the potential total overall yearly costs, including monthly premiums, deductibles and maximum out of pocket when making the choice between various plans. Many plans keep the monthly premiums low by raising the total out of pocket for which you are responsible. These are generally referred to as major medical plans, and they are primarily meant for those who do not get ill often, and who wish to have coverage in case of a serious illness or accident. Ask questions before you pay for coverage, so that you don't have an unwelcome surprise when you are least able to understand the ins and outs of your coverage.
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