Health Insurance is protection against the risk of incurring medical expenses among individuals. A medical insurance policy is a contract between an insurance provider and an individual. The contract is renewable, and has now become mandatory with the passing of the Affordable Care Act. The type and amount of coverage by the insurance carrier is specified in a member contract or “Benefit Summary.” The obligations of each party are listed below:
Individual Deductible: This amount specifies what you are personally liable for prior to your coinsurance kicking in. Once you have met your individual deductible for the year, then the insurance company will coinsure accordingly with your specified plan.
Coinsurance: After the deductible has been met, the insurance company pays a percentage of all covered expenses:
- Bronze – 60/40: the insurance company pays 60% of all covered expenses, you pay 40% until you have reached your Maximum Out-of-Pocket.
- Silver – 70/30: the insurance company pays 70% of all covered expenses, you pay 30% until you have reached your Maximum Out-of-Pocket.
- Gold – 80/20: the insurance company pays 80% of all covered expenses, you pay 20% until you have reached your Maximum Out-of-Pocket.
- Platinum – 90/10: the insurance company pays 90% of all covered expenses, you pay 10% until you have reached your Maximum Out-of-Pocket.
Family Deductible: This amount is typically double the individual deductible. This limitation is primarily set for families of 3 or more. For example: we will look at a family of four individuals where they each have a $500 deductible with a $1,000 family deductible. Let’s say the father undergoes a medical treatment and pays his $500 deductible. At this point the father has met his individual deductible and his coinsurance now kicks in; in tandem, the $500 is also credited towards the family deductible. Now let’s say the mother visits the doctor and pays $350 towards her deductible. She has not yet met her individual deductible, but her $350 is applied towards the family deductible, now totaling $850 spent as a family. Next, child one pays $150 for a doctor visit, where he/she hasn’t met their individual deductible, but since the family deductible of $1,000 has now been met the health plan begins to pay coinsurance benefits for all family members.
Copays: Copayments are similar to coinsurance, rather they are a fixed amount for a set service. These rates are negotiated in advance with the providers by your insurance company and are in effect without you needing to meet your deductible.
Maximum Out-of-Pocket: This is the maximum dollar amount you will spend in any given year for medical services. Once you have reached your maximum out of pocket, the insurance company will cover 100% of all medical expenses. For example: Let’s say you have a $2,000 deductible, 70/30 coinsurance, and a $6,350 max out-of-pocket. You would pay 100% of all medical expenses up to $2,000. After meeting your $2,000 deductible, you would only pay 30% of all future medical expenses until you have paid a total of $6,350 for all combined medical services. After this point you are no longer liable for any medical expenses, and will receive all your health care for free for the remainder of the year. Deductibles and Max out-of-pocket limits reset each calendar year.
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