Co-insurance, co-pays and deductibles all work hand in hand to protect an individual’s finances. That is, they lower the out-of-pocket medical expenses one is required to pay for health services. The following is a step by step of all these terms and how you can leverage them to reduce your medical expenses.
Co-insurance
When an individual and the insurance company that they are registered with both have to pay a certain percentage of the medical fees, it is referred to as cost sharing. Co-insurance, deductibles and co-payments are all examples of cost sharing. Co-insurance and copayments are insurance terms that most people often get confused about. However, they are not mean the same thing. For instance, when you reach your deductible, you are required to pay a portion of the remaining expenses, this is known as the co-insurance amount.
For example, imagine you have an insurance policy with 20% co-insurance. In essence, this means that the insurance company will pay 80% of medical expenses that are covered by the policy and you will take care of the rest. However, the insurance company only covers the 80% after the you have met their deductible amount and paid the remaining 20%. However, this -20% will not be paid forever. It is only paid until the out-of pocket maximum is reached. Afterwards, the insurance company will cover the total amount of medical expenses that are covered by the policy, until the end of the year. This period can vary from one insurance company to the next.
Co-payments
Most people are more familiar with copayments. Copayments are simply the flat (predetermined) fee an individual pays for medical services such as over the counter prescriptions as well as check-up visits to a doctor. This flat fee is paid in addition to what the insurance company already covers. For example, some health medical insurance companies require a 10% copayment for each visit the insured person makes to a doctor. This is regardless of the level or type of medical services provided during the medical visit. However, most copayments are usually not calculated in terms of percentages. The terms and conditions for copayments vary depending on the insurance company. Therefore, it is wise to do some research before settling for a specific medical insurance company.
Deductibles
On the other hand, deductibles refer to the amount that an insured individual has to cover for health care expenses before the medical insurance company covers the rest of the costs (this could be a self-insured company). Most insurance policies and plans base their deductible amounts on an annual basis. By going for an insurance policy with great deductible, copayment and co-insurance plans, individuals can reduce the cost of their medical expenses significantly. For instance, some medical insurance companies have plans that allow individuals the first few doctor visits with a co-payment. Afterwards, your co-insurance and annual deductible will apply for all visits in the future. As a result, insured individuals will not be charged a co-insurance or a co-pay especially for preventive medical services such as regular medical check-ups.