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Tis the season for open enrollment!  Many businesses and private insurance companies offer open enrollment this time of year where the consumer can make any necessary changes to their health insurance plan.  This is a great time to review the benefits that you currently have and make sure it will work for you and your family’s needs next year.

In thinking about health insurance benefits, a huge factor is how much money you will be responsible for when you utilize services.  The initial costs were discussed in Health Care Unraveled Part 1 and Part 2 when we explained premiums and deductibles.  Here we will talk about copay and coinsurance.

The copay is a pretty straightforward concept.  The copay is the amount of money you are responsible for at the time of service.  You go to the doctor and you pay $20 then the insurance plan covers the rest of the cost.  This amount will be charged each time you utilize a covered service.  The money you pay in copays through the year does not go toward your premium or deductible.  Your plan may require a different copay for different services.  For example, you may be required to pay $20 for a routine visit to the doctor but $50 if you go to the emergency room.

The coinsurance becomes a little more confusing.  Coinsurance kicks in after you have paid your deductible.  Rather than a specific dollar amount like with a copay, the coinsurance is a percentage of the bill that you will have to pay.  The insurance company may pay 80% of covered services and you will be responsible for the other 20%.  Coinsurance often comes into play if there is a hospitalization or out of the  ordinary circumstances like needing a surgery.

So let’s look at an example:

Here is your insurance plan:

  • Premium:  $2000
  • Deductible:  $1000
  • Copay: $20
  • Coinsurance: 80/20

During the year, you visit the doctor once for a yearly physical and once for a sick visit.  At your sick visit, it is determined that you need to be admitted to the hospital for pneumonia.  You are in the hospital for 4 days and your total bill is $24,000.

You will pay:

  • $2000  for your premium
  • $1000 for your deductible
  • $40  for your copayments
  • $4800 for your coinsurance
  • $7840 total amount you will have to pay

What has always confused me is individual vs family deductibles when you are on a family health insurance plan.  Excell Benefit Group outlines the details of deductibles for family plans very well.  Basically there are two types of deductibles for family plans.  An embedded plan where each family member has an individual deductible and then there is a family deductible.  The other is an non-embedded plan where there is simply one deductible for the family.  You need to understand which plan you have in order to understand how much money you might need for medical expenses throughout the year.

It is important to note that the insurance company will only pay for services that are covered in your plan.  For example if the insurance company has determined that they will cover a CT scan for an injury but not an MRI and you choose to have an MRI, you will be responsible for the cost of that test.  Sometimes physicians may suggest or order tests that they know will help them with diagnosis and treatment, but it may not be covered under your insurance.  As a consumer, you have the right and should ask questions about what is covered under your plan and if you can get services for a lower cost elsewhere.

How often prior to making a large purchase do you consult reviews online and compare prices?  Why would you not do the same for something as important as your health insurance benefits? Know your coverage and know your options.


*Note:  All of the information in this post is the result of my own personal research.  You should seek expert consultation when buying and utilizing health insurance benefits.