What You Need to Know About Health Insurance Deductibles and Premiums

Purchasing health insurance is a pretty important part of life, but the process isn’t always easy. How do you know whether you are getting a good deal or even one that matches your unique healthcare needs?

Thankfully, there are a few basic pieces of information that can help take the mystery out of finding the ideal plan. Here is what you need to know about health insurance deductibles and other related parts of your policy.

How Do Deductibles Work for Health Insurance?

Deductibles can be a big part of health insurance, and most policies include them. A deductible is the amount of money you pay out of pocket for medical care before your insurance provider will pay any expenses. You select the deductible amount at the time you purchase the policy and it can’t be changed until renewal time.

It is also important to know that some plans may not carry a deductible. This is ideal in certain situations where you know you’ll have a large number of appointments or prescriptions throughout the course of a year and want to keep costs to a minimum. The general rule of thumb is that a smaller deductible means a larger monthly premium and vice versa.

Does Your Premium Count Towards Your Deductible and How is It Calculated?

Many people wrongly assume that a premium payment counts towards the insurance deductible. A premium payment is really just the cost of having the policy in place.

You must continue to make premium payments for coverage to be valid, whether you go to the doctor or not. This is very important to remember, as skipping a payment could lead to cancellation of your policy at a time when you really need to use it.

If you find yourself continually forgetting to meet a payment deadline, consider options such as paying your premiums upfront (if possible), sending the check through your online banking app, or arranging an automatic withdrawal with your insurance company.

In addition, it’s incredibly important to know that a lot of factors go into the premium calculation process. Your age, weight, whether or not you’re a smoker, where you live, and many other elements all determine how large your premium payment will be. The plan you choose also plays a crucial role in determining your premium costs.

What is Co-Insurance and How Does It Affect Your Deductible?

Co-insurance is the percentage of your medical bills that you’ll have to pay after you’ve met your annual deductible. Once you’ve met your deductible, you will split the costs of your medical bills with the insurance company.

For example, let’s assume you’ve already met your deductible for the year, and you currently have a $1,000 medical bill. You also have a 20% co-insurance provision in your policy. In this instance, you would pay $200 directly to your medical provider, while the insurance company pays the remaining $800. As you can see, the lower your co-insurance percentage is, the less you’ll have to pay to the provider.

Co-insurance is also a completely different concept from a copayment or copay, so make sure you don’t get confused by the terminology.

What is a Copayment and Does It Count Toward Your Deductible?

The great news about having copays for certain ordinary and routine expenses is that you are charged a flat rate that your insurance company has negotiated with the doctor. In most cases, this would be far less expensive than having each individual medical service charged to your plan.

A copayment is another expense that does not count towards your health insurance deductible. Copayments are an important part of the process and very handy to have for annual checkups, annual gynecological exams for women, and other preventative services.

In most cases, copays are under $50. Some can even be as low as $5 or nothing at all. Like most things related to your policy, this can vary from one insurer to another, and it can also depend on the type of medical care you are receiving. It is important to speak with your agent directly to get a list of copays related to your plan.

When Does a Health Insurance Deductible Reset?

In most cases, your health insurance deductible resets at the beginning of the year. For some plans, this is January 1st and for others it might be the start of the policy year. The important thing to remember is that you only have one deductible each year. Once you meet it, you don’t have to do it again until the renewal date.

If you’re still confused about how your health insurance plan works, it might be time to contact an insurance agent. Click here for more information.