hospital pick

In the US, medical treatment can be exceedingly costly. A typical three-day hospital stay can cost tens of thousands of dollars or more, depending on the type of care received, but a single doctor’s appointment may only cost a few hundred dollars. Many of us lack the financial means to cover such substantial bills in the event of illness,

 

particularly since we have no idea when we might get sick or hurt or how much medical attention we would require. One method to bring down these expenses to more manageable levels is through health insurance.

The way it typically works is that the consumer (you) pays an up front premium to a health insurance company and that payment allows you to share “risk” with lots of other people who are making similar payments. Since most people are healthy most of the time, the premium dollars paid to the insurance company can be used to cover the expenses of the small number of enrollees who get sick or are injured. Insurance companies, as you can imagine, have studied risk extensively, and their goal is to collect enough premium to cover medical costs of the enrollees. There are many, many different types of health insurance plans in the U.S. and many different rules and arrangements regarding care.  hospital pick

 

Important Insurance Terms and Concepts

Out-of-pocket expenses: The terms “out-of-pocket cost” and “cost sharing” refer to the portion of your medical expenses you are responsible for paying when you actually receive health care. The monthly premium you pay for care is separate from these costs.

Annual deductible: The annual deductible is amount you pay each plan year before the insurance company starts paying its share of the costs. If the deductible is $3,000, then you would responsible for paying the first $3,000 in health care you receive each year, after which the insurance company would start paying its share.

 

Copayment (or ‘Copay’): The copay is a fixed, upfront amount you pay each time you receive care when that care is subject to a copay. For example, a copay of $40 might be applicable for a doctor visit, after which the insurance company picks up the rest. Plans with higher premiums generally have lower copays and vice versa. Plans that do not have copays typically use other methods of cost sharing.

Coinsurance: Coinsurance is a percentage of the cost of your medical care. For an MRI that costs $2,000, you might pay 20 percent ($400). Your insurance company will pay the other 80 percent ($1600). Plans with higher premiums typically have less coinsurance.

Annual out-of-pocket maximum: The annual out-of-pocket maximum is the most cost-sharing you will be responsible for in a year. It is the total of your deductible, copays, and coinsurance (but does not include your premiums). Once you hit this limit, the insurance company will pick up 100 percent of your covered costs for the remainder of the plan year. Most enrollees never reach the out-of-pocket limit but it can happen if a lot of costly treatment for a serious accident or illness is needed. Plans with higher premiums generally have lower out-of-pocket limits.

What is means to be a ‘Covered Benefit’: The terms ‘covered benefit’ and ‘covered’ are used regularly in the insurance industry, but can be confusing. A ‘covered benefit’ generally refers to a health service that is included (i.e., ‘covered’) under the premium for a given health insurance policy that is paid by, or on behalf of, the enrolled patient. ‘Covered’ means that some portion of the allowable cost of a health service will be considered for payment by the insurance company. It does not mean that the service will be paid at 100%.

For instance, there may be a copay in a plan where “urgent care” is “covered.” The patient must pay the copay out of pocket. In the event that the copay is $200, the patient is responsible for paying this amount (often at the time of service), with the remaining authorized cost for the urgent care service being “covered” by the insurance plan.

An insurance company may choose not to contribute anything to a “covered benefit” in specific circumstances. For instance, if a patient’s insured health service costs $800 and they haven’t yet met their $2,000 yearly deductible, they will be responsible for paying the $800 (usually at the time of service). The fact that this procedure is “covered” means that the patient will only have to pay $1200 toward future services before the insurance company begins to pay its portion. This is because the cost of the service is deducted from the yearly deductible.

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