Choosing a health insurance plan is an important decision. Like with any big purchase, you’ll probably compare how much you’ll pay and what you’ll get in return. But when you’re shopping for a health plan, there’s more to determining your total costs than just the premium, which is the payment you make to your health insurance company to keep your coverage active.
Here are some other things you should look at when you’re shopping for health care coverage:
- What services are covered (or potentially not covered) under your health plan
- How much your health insurance provider will pay for covered services
- How much you’ll be responsible to pay out of your own pocket for things like doctor visits, prescription drugs, or a hospital stay
So, how can you decide which plan works for you? To get started, let’s review some basic cost-related health insurance terms.
Defining Basic Health Insurance Terms
Every health plan option has a Summary of Benefits, or a chart of all the different types of services the health plan covers. This chart will also show what it would cost you for each type of service. Comparing the Summary of Benefits for the health plans you are considering is a good place to start.
Here are some basic health insurance terms that you may find in a Summary of Benefits:
- Premium – A premium is the set amount you pay for your health insurance plan. Typically, you and/or your employer pay your health care premium bi-weekly, monthly, quarterly, or annually. You must pay your premium to receive benefits.
- Cost-sharing – Cost-sharing refers to the amount of money you pay out-of-pocket for health care services that aren’t fully (100 percent) covered by your health insurance company. Cost-sharing includes types of payments called copayments, deductibles, and coinsurance.
- Copayment – The copayment (or copay) is the set amount of money you pay for a covered health care service. Your copay is typically paid at the time of your health care service and varies by type of service. For example, the copay for seeing your primary care doctor may be different from your copay for an emergency room visit. Copay amounts are outlined in your health plan’s Summary of Benefits.
- Deductible – Deductible refers to the amount of money you pay out-of-pocket for health care services before your health insurance company shares the cost with you. Deductibles may only apply to certain health care services.
- Coinsurance – Coinsurance is the percentage you pay out-of-pocket for some covered health care services. For example, if you have a coinsurance of 20 percent for a covered health care service, your health insurance company pays 80 percent of the cost and you pay the remaining 20 percent. Keep in mind that when you use in-network providers, the amount you pay is based on a discounted rate that your health insurance company has negotiated — not the full price of the service.
Does A Higher Premium Mean I Pay Less Out-of-Pocket?
The simple answer: Sometimes. You’ll need to look at the health plan’s out-of-pockets costs when you receive services.
When selecting a health plan, be sure to consider your needs and how much you anticipate using heath care services. If you expect to use health care services frequently in the plan year, then opting for a plan with a higher premium may save you money over the year. But if you expect to have a year of good health, it may be more affordable to choose a lower-premium plan.
Since the future is unpredictable, think about your personal health, budget, and preferences to decide which plan is the best fit for you. Learn more about choosing the right plan.