What You Need to Know About Health Insurance Deductibles and Premiums

When choosing a plan, it’s a good idea to think about your total health care costs, not just the bill (the “premium”) you pay to your insurance company every month. Other amounts, sometimes called “out-of-pocket” costs, have a big impact on your total spending on health care- sometimes more than the premium itself.

Across the United States, Americans pay wildly different premiums monthly for medical coverage. Though these premiums are not determined by gender or pre-existing health conditions, a number of other factors may impact how much you pay. If you don’t have a clear idea of your expenses, you may feel like you are not in control. However, when you become familiar with all the costs, you may be able to make the right choices and regain control.

To get a better understanding of your health insurance costs, it is important to first look at all the key types of costs.

Premium

A premium is the amount of money charged by your insurance company for the plan you’ve chosen. It is usually paid on a monthly basis, but can be billed in a number of ways. You must pay your premium to keep your coverage active, regardless of whether you use it or not.

10 Factors that Affect Premiums:

State and federal laws dictate what health insurance must cover and how much insurers can charge.
Whether you are insured through an employer’s group plan or buy it on your own
Your income. Low-wage workers tend to pay more though employers but may pay less through a federal or state exchange due to subsidies
Your employer’s size. Insurance is usually cheaper at large companies.
The state in which you reside.
Where you live. Premiums tend to be lower in urban areas versus rural areas.
The county in which you live. Some counties have only one plan, while others have more competition, which helps to reduce costs.
The type of plan you choose. Preferred provider organizations (PPOs) and platinum plans through the federal health insurance marketplace tend to cost the most.
Your age. Older individuals may pay up to three times more.
Your tobacco use. Premiums for tobacco users may cost up to 50% more.

Deductible

On top of premiums, everyone who carries health insurance also pays a deductible. Deductibles can be a big part of health insurance, and most policies include them. A deductible is a set amount you have to pay every year toward your medical bills before your insurance company starts paying. This means you pay 100% of your health expenses out of pocket until you have a predetermined amount. At this point, health insurance kicks in and you pay a percentage of your bills, with the insurer covering the rest. Most workers are covered by a general annual deductible, which means it applies to almost all healthcare services.

It is also important to know that some plans might 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.

Coinsurance

Coinsurance is the percentage of the medical bill you share with your insurance company after you’ve paid your deductible. Unless you have a policy with 100% coverage for everything, you have to pay a coinsurance amount.

Generally speaking, plans with low monthly premiums have higher coinsurance, and plans with higher monthly premiums have lower coinsurance. In health insurance, a coinsurance provision is similar to a copayment provision, except copays require the insured to pay a set dollar amount at the time of the service.

Copayment (or Copay)

Your copayment, or copay, is the flat fee you pay every time you go to the doctor or fill a prescription. It’s usually a relatively small dollar amount and does not count toward your deductible. Copay plans spread the cost of care over a full year and make predicting your medical expenses easier. A copay plan charged the insured a set amount at the time of each service.

Additional Expenses to be Aware Of:

Like any type of insurance plan, there are some expenses that may be partially covered, or not at all. Less obvious expenses may include services provided by a doctor or hospital that is not part of your plan’s network, plan limits for specific kinds of care, such as a certain number of visits for physical therapy per benefit period, as well as over-the-counter drugs.

How to Estimate Your Costs:

How often might you see a doctor or need medicine? An educated guess can help you predict these needs- and what you’ll pay for them. Here are some steps to help you figure out how much care you might need going forward.

Look Back on Past Expenses

If you keep medical receipts, go through them. Add up your costs for doctor’s visits and medicines. Or ask your doctor for a history of your payments over the last year. Your drug store may have a record of your payments for medicine too.

Use an Online Calculator

Some websites can show you estimated insurance costs. If you have employer insurance, your company may offer a tool to estimate costs.

Anticipate Your Family’s Health Needs

Yearly checkups for children and immunizations are free, but you will have to figure in costs for treating chronic conditions like high cholesterol and diabetes, doctor appointments, and medicine.

Other expenses might include counseling for mental health and planned surgeries or medical procedures that you might have to share in the cost by paying a copay or coinsurance.

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 the 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 up front (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.

Concluding Thoughts

No one plans to get sick or hurt, but most people need medical care at some point and purchasing the right health insurance plan is a pretty important aspect of adult life. Consider these points to ensure you are getting a good deal that matches your unique health care needs.