What does a deductible mean and why do you still have to spend money when you go to a doctor if you pay for insurance every month?
What are the other fancy words I need to know?
How do you know if something is a good deal?
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It works similar to just about any other insurance plan: you pay the insurance company a monthly fee, and in exchange they cover some or all of your medical costs when you need them. Here are definitions for some of the terms you may have stumbled upon:
* **Premium:** The monthly fee you pay to the insurance company.
* **Deductible:** The amount you have to pay for a good or service before your insurance kicks in.
* **Copayment:** Also abbreviated as copay, this is the flat rate you pay for a good or service that’s covered by your insurance.
* **Coinsurance:** This is when you still have to pay some of the costs above the deductible, usually a percentage value.
* **Out-of-pocket maximum:** If your combined payment for deductibles, copay, and coinsurance goes above this amount within a year, everything above that is paid by your insurance company.
Let’s go with an example to illustrate how these all pay out. You have an insurance plan with a $2,000 deductible, 20% coinsurance, $100 copay for a doctor’s visit, and an out-of-pocket maximum for $4000. You get into an accident that requires surgery; the hospital bills your insurance company for $10,000. This means you’ve gotta pay $2,000 to cover your deductible. Of the remaining $8,000, also you have to pay 20%, or $1,600, as coinsurance. You have five followup appointments with the doctor to see how you’re recovering. However, the fifth appointment doesn’t require a copay, because it’s above your out-of-pocket maximum.
Now, there are plans out there that have lower deductibles, copays, coinsurance, and/or out-of-pocket maximums, but those usually have the tradeoff of charging a higher monthly premium. Some insurers also have special deals with medical providers where they get better rates; they sell plans where you have cheaper premiums, but you can only use it with those affiliated doctors and hospitals.
Most insurance is provided by one’s company, usually with a discounted premium. The US government also has several insurance programs: Medicare for the elderly, Medicaid for those below the poverty line.
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