by Brooke Jarchow
There seem to be endless questions regarding health insurance and health care terminology. However, understanding the difference between deductibles, copayments, coinsurance, and cost-sharing can help you understand when and how much you will have to pay for health care.
Not-so-coincidentally, the most common question regarding health care coverage is, “What is my deductible and how does it work?”
When you and your health insurance company each pay part of your medical expenses, it’s called cost sharing. Deductibles are part of cost sharing.
A deductible is the amount you pay for health care services before your health insurance begins to help you pay expenses. Once you meet your deductible, your insurer begins paying more health care costs through copayments or coinsurance.
For example, if your deductible is $1,000, that means you’ll pay for all of your medical and pharmacy bills up front and out-of-pocket until the amount you’ve paid in total reaches $1,000. At that point, you can then share future costs with your insurance plan for the remainder of the year.
So, if you expect to visit the doctor often (maybe you have a chronic illness or are planning to become pregnant or have surgery), you might consider a plan with a lower deductible and higher monthly premiums. When choosing this type of plan, your frequent doctor visits will likely help you reach your deductible faster than someone who does not need a doctor as often. Paying higher monthly premiums allows for more predictable, monthly costs.
If you are healthy and do not expect the need for significant health care, you could
benefit financially from choosing a plan with lower monthly premium payments. . However, if you do end up needing to see a doctor, you will have to meet your potentially-higher deductible before your insurance starts to help with medical costs. In this case, you may benefit from setting up a Health Savings Account (HSA).
In the end, there are many health plans to choose from and many factors to consider before making your final decision. The key to finding the right plan is to understand your current and future health care needs.