How Are the Costs Of A Health Insurance Plan Made Up?

Unless you are familiar with health insurance then the costs involved in a health insurance plan could appear to be a bit complex and many people are surprised that, after they have paid what seems like a small fortune, they find themselves faced with a bill the first time they submit a claim. So before you are hit with a substantial medical bill therefore, it is a good idea to take a moment to learn just what sort of costs you should expect to incur on your health insurance policy.

The first and probably most obvious cost is the monthly premium or, in some cases, the quarterly premium or annual premium. If you are a member of an employer's or union group plan then you will generally be required to pay only a percentage of the premium and this will usually be taken directly from your pay check.

The majority of health insurance policies also include an annual deductible which is a sum of money which you will have to pay before your insurer starts to pay out on any claims. Thus, with an annual deductible of $1,000 you will have to pay the first $1,000 of your medical bills every year before your insurer will begin paying out. You may be familiar with paying a deductible from your experience with car insurance and, if this is the case, will know that the higher the deductible on your policy the lower your premiums will be. Also, if you have a family health insurance plan then this will frequently include multiple deductibles for the individual members covered under the plan.

Some health insurance plans will also include a co-payment which is a fixed sum of money which you will need to pay towards every medical bill. Just how much you will need to pay in co-payments will depend to a large extent on the type of plan you have. For example, co-payments on HMO plans are often less than those on indemnity plans. In addition, the co-payment can also vary between different forms of medical service and, if you are enrolled in an HMO plan, will generally increase if you are treated outside of the HMO network.

In cases where no co-payment is required you will normally find that this is replaced by co-insurance which is similar and is a sum of money, this time expressed as a percentage, which you will be required to pay towards every medical bill. A normal co-insurance ratio is 80/20 which means that your insurer will pay 80% of any medical bill while you pay 20%. As in the case of co-payments, co-insurance will usually rise if, as a member of an HMO plan, you are treated outside of the HMO's network. In this case you will also find that, whenever a claim exceeds what is considered by the insurance company to be 'reasonable and customary', you could be required to pay the additional cost.

By this time you will realize that comparing health insurance plans is about a great deal more than simply comparing premiums. As a consequence, it is vitally important for you to read the details of any health insurance quote very carefully and that you avoid the common temptation to simply pick the plan with the smallest monthly premium.

If you wish to keep costs down and are a member of an HMO plan then you should try to stick within the HMO's network and, where you do feel the need to go outside of the HMO's network, then compare actual treatment costs to what your insurer considers to be 'reasonable and customary' before you agree to treatment.

It is also possible to keep your costs down on many plans by adjusting the deductible and by selecting higher or lower co-insurance. Just how this can be done is beyond the scope of this particular article but is a question of balancing the different costs involved against the likelihood of having to claim on the policy.

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