| How Health Insurance
Plan Co-Insurance Levels Work! |
| Choose
from the terms below to get detailed information on how each of
these benefit options work. |
EGS would rather it's clients be informed
buyers than to simply sell insurance and added benefits that the client
may not need. Therefore we are presenting this information as a
helpful guide for you to make an informed decision on which plan to buy
and which benefits to include. We are not attempting to persuade you to
either include or exclude certain benefits from your health insurance
plans. We simply want you to make the right decision for you and be
happy with your selection. This guide is presented in general terms
and attempts to explain how health insurance plans work. Not all
plans work equally nor does this imply that this information is valid in
all states or situations. It does however, give the general workings
of many health insurance plans and how deductibles, coinsurance, and
copays function.
Co-Insurance This term
is one that is seldom used by the public or agents when speaking to the
client. It is not hidden, its is simply referred to many times as
the type of plan you buy. Most people know this as the 80/20, 80%,
50%, or 100% type of policy. Most policies that we sell are either
80/20 or 50/50 plans. These are the Co-insurance levels for the
plan. Now what that means.
When you see this on a policy or quote it
is referring to the percentage the insurance company will pay on the
charges that come after you have met your deductible. Don't be
afraid here! Many clients ask who pays what percentage.
Typically plans will show the insurance company's portion first in this
benefit description. For example, an 80/20 plan would mean that
after your deductible has been met, the next "x amount of medical
charges" will be paid for at 80% by the insurance company and you
will be responsible for the 20%. A plan that is 50/50 would be a 50%
split between you and the insurance company for the next "x amount
of medical charges". After this amount has been spent by
you, the plan would typically pay at 100% for the remaining charges
incurred up to a Life Time Maximum.
We can now say you have reached your Maximum Out
Of Pocket for the year. The co-insurance levels and life time
maximums all impact your premium. Just as a higher copay lowers your
premium, so will a higher deductible, and a lower coinsurance
level. If this seems confusing, don't feel bad. It can
be very confusing. We have an example below to help better explain.
In this example let assume your plan has a $500
deductible, $20 doctor office copay, 80/20 to $5000
(referred to above as "next x amount of charges"), and a life
time maximum of $5 million. Just for ease of figures, let's
assume you have not met any of your deductible. Let us also assume
that you go to the doctor and are diagnosed with a very bad lung infection
and pneumonia that requires a hospital stay.
Example 1.3
| $90
Doctor Office Charge |
You
pay $20 |
Insurance
pays $70 |
|
| $600
Hospital Admission |
You
pay $500 |
Insurance
pays $0 |
$100
remaining bill |
| $100
remaining from above |
You
pay 20% or $20 |
Insurance
pays 80% or $80 |
$0
remaining bill |
To recap: You paid the $20 for the
doctor office charge. You paid the first $500 and have satisfied
your deductible. You have also paid your 20% of the Co-insurance
level from the remaining $100 left over from the Hospital Admission
charge. Now you are in the co-insurance portion of your policy and
have met $100 (even though you only had to pay $20 or 20%) of the next
$5000 in charges. Assume you had to stay a few days and accumulated
a bill, up and above what we have dealt with so far, totaling an
additional $6500 in medical expenses. See example 1.4 below.
Example 1.4
| $6500
additional charges |
You
pay 20% of $4900 or $980. (Remember you already paid 20% on the
additional $100 above.) |
Insurance
pays 80% of $4900 or $3920. (Remember the insurance already paid 80%
on the additional $100 above) |
Remaining
bill is $1600 |
| $1600
remaining from above |
You
pay $0 |
Insurance
pays 100% or $1600. |
Your
Maximum Out Of Pocket has now been met. |
You have now satisfied your entire
deductible, and co-insurance level of the policy. The insurance has
begun to pay at 100% up to the Life Time Maximum of $5 million dollars as
it did with the remaining $1600 above. You are said to have reached
your Out Of Pocket. In this case the Out Of Pocket limit would be
$1500. This number is achieved by adding your deductible of $500 to
the 20% portion of the next $5000 in charges, which equals the maximum you
can spend in any year of $1500.
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