Health Insurance Options for Self-Employed People – Part 2
Important Health Insurance Terms
In the last post I discussed why health insurance is important and what the different plan types are – in this post I’m going to cover some important health insurance terms you’ll come across when looking for health insurance
Health Insurance Terms – You’ll see and hear these terms often when shopping for health insurance:
- premium – Your premium is the amount you pay to the health insurance company each month to maintain your coverage. When trying to understand the cost of a health insurance plan, the premium is the first thing to consider. But make sure to balance it against other costs, such as copayments, deductibles and coinsurance. A good rule: Choose a lower premium/higher deductible if you want to save money now, and a higher premium/lower deductible if you want to be more financially prepared for unexpected medical expenses later.
- copayment – Your copayment, or “copay,” is the specific dollar amount you may be required to pay up front for a specific type of service. For example, your health insurance plan may require a $15 copayment for an office visit or brandname prescription drug, after which the insurance company pays the remainder of the charges. A good rule: If you make frequent doctor’s office visits, make sure you choose an affordable and consistent copayment.
- deductible – Your annual deductible is the amount you may be required to pay out-of-pocket before the insurance company will begin paying for your covered medical claims. Keep in mind, your monthly premiums and copayments will often not count toward your deductible. Not all plans require a deductible, but choosing a plan with a higher deductible can keep your monthly premiums lower. A good rule: Keep your deductible to no more than 5% of your gross annual income.
- coinsurance – Coinsurance is the amount that you are obliged to pay for covered medical services after you’ve satisfied any copayment or deductible required by your health insurance plan. Think about it this way: the insurance company may limit coverage for certain services to, say, 80% of charges. So, for example, if your insurance benefits cover 80% of x-ray charges, you will need to pay the remaining 20%, even if your annual deductible is already met. That 20% is onsidered coinsurance.
- maximum out of pocket cost – Pay attention to this amount when considering a new health plan. Your maximum out-of-pocket cost sets a limit to your annual financial liability. Once you have paid out of pocket (typically through deductibles, copayments or coinsurance) to the “maximum” amount, the insurance company pays the full charges for any additional cover ed medical services rendered that year. Your monthly premium will not count toward your maximum out-of-pocket costs