When considering co-insurance and pay-sharing policies, understanding the difference can save you from spending on medical and dental expenses. But what exactly do these terms mean? And how do they influence your choice of plan?
Coinsurance versus co-payment
Although you will have to pay a premium for both types of policies, there are a few differences that you should be aware of. Let’s start by looking at how coinsurance policies work.
Coinsurance is part of the medical expenses for which the insured is responsible. It is usually in the form of a percentage and only applies to covered services. Medical expenses incurred for services not covered by the plan will be the responsibility of the insured. You should also be aware that the deductible must be satisfied before co-insurance can begin. Here are three potential scenarios for the same hospital visit.
Here are three scenarios for an 80/20 co-insurance plan (the plan pays 80% of the bill and you pay 20%) and a $3,000 deductible.
Scenario 1 – You incurred an expense of $1,800. However, you didn’t pay a cent for the franchise. In this case, you will be responsible for the entire balance of $1,800.
Scenario 2 – You have already contributed $2,500 to the franchise before visiting the hospital. Therefore, you need to complete the franchise by paying $500. Then you also have to pay 20% of the original bill, which is $360. You end up paying $860 per visit in the end.
Scenario 3 – You have already met a $3,000 deductible earlier in the calendar year. This means that assuming all included items are covered, you will only pay 20% of the bill, which is $360. The health insurance provider will be responsible for the other $1,440.
The payment ratio is the amounts that the insured must pay to the medical or dental provider at the time the services are provided. (Quick note: Some care or prevention services are offered free of charge.) Co-payments typically start at $25 and go from there based on the level of service received. They apply to select services such as office visits, prescriptions, specialist visits, emergency care and emergency care visits. As with coinsurance, the deductible must be satisfied before the co-payment can begin. Again, here are three potential scenarios for dental insurance with a $50 co-payment and a $200 deductible.
Scenario 1 – The dentist tells you that you need a filling that costs $150. Since you have not yet paid any of your deductibles, you will be paying the entire bill.
Scenario 2 – If you have already paid the $175 deductible, you will only be responsible for $75 for the duration of the visit. This amount covers the remaining $25 to meet the deductible and $50 co-payment. Scenario 3 – Once the deductible is satisfied, you will only have to pay the $50 co-payment.
What about exorbitant medical bills under both types of policies? In most cases, there is a limit for the insured, the maximum amount over which the insurance provider must pay for everything else. It’s important to check your policy statements to confirm what you have and find out how important it is.
Why it’s worth knowing the difference
In some cases, medical and dental policies have both coinsurance and co-payment. You must comply with the deductible for the services provided. Once you do this, you pay the co-payment during treatment and receive a bill in the mail for the part of coinsurance you owe, if any. To illustrate, if your insurance provider requires a $50 co-payment and a 20% co-insurance fee, a $1,000 service will cost you $250 if the deductible is satisfied.
If you have a co-insurance policy with a high degree of deductible, this can mean significant costs until the maximum limit is reached. However, your monthly premiums may be significantly lower.
Co-payment plans with low deductibles equal the minimum visit cost, which seems better. However, the premiums are likely to be much higher. What’s more, you can spend a ton if you need an intensive treatment that requires multiple doctor visits every week.
A word of caution about the intranet
Always make sure the provider is connected to the network before seeking medical care. Otherwise, your insurance company may reject the claim and hand over the entire bill to you or force you to pay significantly higher rates previously agreed upon.
The next time you are “purchasing a medical or dental insurance policy, read the co-insurance and co-payment provisions carefully before enrolling. Otherwise, you may end up spending much more than expected on medical or dental care.