Are You Familiar With How the Costs Of A Health Insurance Plan Are Calculated?

If you are unfamiliar with health insurance then the costs of a health insurance plan might seem to be a little complex and many people are surprised that, after they have paid what seems like an arm and a leg, they find themselves landed with a bill the first time that they make a claim. Before you are landed with a large medical bill therefore, it is a good idea to take a moment to understand just what sort of costs you should expect to incur on your health insurance plan.

The first and probably most obvious cost is the monthly premium or, in some cases, the quarterly premium or annual premium. If you belong to an employer's or union group plan then you will normally be asked to meet only a percentage of the premium and this will normally be taken directly from your pay check.

The majority of health insurance plans will also include an annual deductible which is a sum of money that you will be required to pay before the insurance company starts paying out on any claims. In other words, with an annual deductible of say $1,000 you will have to meet the first $1,000 of your medical bills every year before the insurance company will start paying out. You might be familiar with paying a deductible from your experience with motor insurance policies and, if so, will also know that the more the deductible on your plan the lower your premiums will be. Also, if you have a family health insurance plan then this will frequently include multiple deductibles for the individual members covered under the plan.

Most health insurance policies will also include a co-payment which is a fixed amount of money that you will have to pay towards every medical bill. Exactly how much you will have to pay in co-payments will depend to a large extent on the type of plan you have. For instance, co-payments on HMO plans are normally lower than those on indemnity plans. Additionally, the co-payment will also vary between different forms of medical service and, if you are enrolled in an HMO plan, will normally be higher if you seek treatment outside of the HMO network.

In cases where no co-payment is required you will usually find that this is replaced by co-insurance which is similar and is a sum of money, in this case expressed as a percentage, that you will again have to pay towards every medical bill. A typical co-insurance ratio is 80/20 which means that the insurance company will meet 80% of any medical bill while you pay 20%. As in the case of co-payments, co-insurance will normally rise if, as a member of an HMO plan, you seek treatment outside of the HMO's network. In this event you may also find that, when a claim exceeds what the insurance company considers to be 'reasonable and customary', you might be required to meet the additional cost.

By now you will realize that comparing health insurance plans is about a great deal more than simply comparing plan premiums. As a consequence, it is critically important that you read the details of any health insurance quote very carefully and avoid the frequent temptation to simply select the plan with the smallest monthly premium.

If you want to keep costs low and are a member of an HMO plan then you should attempt to stay inside the HMO's network and, when you do feel the need to go outside of the HMO's network, then compare actual treatment costs to what the insurance company considers 'reasonable and customary' before you undergo treatment.

It is also possible to keep your costs down on many plans by raising or lowering the deductible and by selecting higher or lower co-insurance. Precisely how this can be achieved is beyond the scope of this particular article but is a matter of balancing the various different costs against the likelihood of needing to claim on the plan.

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