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Understanding Health Insurance Quotes: Premiums, Coinsurance, Copayments & Deductibles

by EINSURANCE

Ever find yourself baffled by insurance company jargon? You’re not alone. Many Americans find it difficult to decipher the terminology, and that can keep you from getting the cheapest health insurance, or at least the plan that best suits your needs. In the interest of making you a better informed consumer, here are some basic definitions of three key health insurance terms.

 

Premium

This is the annual cost of your health insurance policy. It’s a fixed rate, usually assessed as a monthly charge. If you have employer-provided health care, your employer may pick up all or part of the premium.

 

Copayments

Also called copays, this is what you have to cough up out your pocket whenever you visit a doctor, fill a prescription or have a procedure performed. Your copayment will vary depending on the type of policy you have, but will be fixed according to the type of service you receive. For instance, you may pay $30 to see your primary care physician, $40 to see a specialist, $10 for a generic prescription and $25 for a brand name drug, but those prices will not change during a policy year. Note that some services, like eye exams, may not be covered at all by your insurance and you’ll be expected to pay 100%. Copayments are typically associated with HMOs and with out-of-network services if you’re in a PPO.  As a rule, if your plan has a high copayment rate, your monthly premium will tend to be low. Conversely, the lower the copay, the higher the monthly premium.

 

Coinsurance

This health insurance cost is factored as a percent of the care or treatment received. For example, if you may get health insurance quotes that specify 70/30, 80/20 or 90/10 percentage participation rates. The first number in the ratio is what your insurance company will cover; the second number is what you have to cover out of pocket. It’s basically a shared risk between you and your health insurance carrier. Fortunately, many plans cap the total amount of out-of-pocket you can pay, and once it is met, the insurer will pay 100% of additional costs.

 

Deductible

Unlike auto insurance deductibles, which are assessed per event, health insurance deductibles are typically fixed annual amounts that you must meet before your insurance company starts paying any other plan benefits.  The higher the deductible, the lower your premiums will probably be. Some plans offer what is called a High Deductible Health Plan that you couple with a Health Savings Account, which allows you to realize tax advantages by putting money pre-tax into a special savings account, which you can access without penalty to pay for medical services.

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