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Making Sense of Benefit Summaries:
Often times employee’s receive a summary of benefits for their medical plan and stare at it with a look of bewilderment. Sure you can give someone a 9 page document breaking down the structure of services, but most employees really don’t understand the language within this document. Many employees are embarrassed to ask questions on the language within their document to their employer, especially as a new hire. Those who do choose to ask questions to their benefits contact often time get convoluted answers that don’t really help them understand the plan still. Typically the issue of confusion revolves around 4 health insurance related terms, once these 4 terms are understood, the ability to make a decision on benefits or comprehend the plan becomes so much more achievable.
Term #1 - Copay’s:
Copays are typically the easiest item to understand as well as the most attractive word when looking over a summary of benefits. A copay is simply the cost you will pay when you receive a particular service. Copays are very common on items such as seeing your doctor or filling a prescription. For example if my summary of benefits says that to see my primary care doctor it is a $30 copay and to fill a generic prescription the cost is $20, my total bill for those 2 services is simply $50 combined (no more and no less). It is important to note that seeing a specialist doctor or filling a brand name or non-formulary prescription will generally entail higher copay’s. Also, it can be advantageous to know that preventative health coverages (such as a routine physical) are covered by your primary care physician at no cost to you and a copay does not apply. Generally speaking plans that feature more copay related line items on their summary of benefits have stronger potential savings when utilizing health coverage.
Term #2 - Deductibles:
Deductibles are the total dollar amount that you are responsible for prior to your health insurance carrier shouldering any costs. For example if you have a $1,000 deductible and you needed to be admitted to the hospital, the first $1,000 of services on the insured member. After the $1,000 of services has been paid by the member then your health insurance plan picks up corresponding costs subject to your copay or coinsurance (see Term 3 for coinsurance). It is important to note that many items are not subject to the deductible and on your summary of benefits it will note if this item waives the deductible (deducible does not apply) or if this item is subject to the deductible (deducible does apply). On many plans items such as primary care doctor visits, specialist visits, urgent care visits, and generic medications are not subject to the deductible. This means that for these items you will just pay your general copay which is a good thing. It is important though to note that in this case, the money you pay towards your copay do not count towards your deductible. It is also good to note that often times there is a deductible for the health insurance portion of your plan and a separate lower cost deductible for the pharmacy portion of your plan.
Term #3 - Coinsurance:
Coinsurance is the amount that you and your health insurer split the cost of your bill after your deductible is achieved. Typically the coinsurance splits range between 20% and 40% for the insured member. If the split says 30%, the member would be responsible for 30% after the remaining bill after the deductible and the health insurance carrier would be responsible for the remaining 70%. As an example let's say that someone was admitted to the hospital and all services were subject to the deductible and coinsurance with no copays; if the total hospital bill was $5,000 and the deductible was $1,000 then the member pays the first $1,000 and then the remaining $4,000 is split via coinsurance. At a 30% coinsurance split the member would then be responsible for $1,200 of the remaining bill and the health insurance carrier pays the additional $2,800. This results in a final breakdown as follows:
- $5,000 total hospital bill
- $1,000 member cost deductible
- $1,200 member cost coinsurance
- $2,800 health insurance cost.
Term #4 - Maximum Out of Pocket:
Maximum Out of Pocket (also known as Calendar Year Maximum), is the most you will pay in health costs in any given calendar year. This can consist of anything that you run through your health insurance including: copays, deductibles, and coinsurance. It even accounts for prescription drug costs. The maximum out of pocket is a critical piece of the health plan as it protects you from catastrophic financial burden. There is a varying range on a maximum out of pocket and it can by up to $7,900 for an individual (in the year 2019). The good news is that regardless of how many medical expenses a member incurs, they will never pay more than the maximum out of pocket in a calendar year.
Concluding Note:
Even with the understanding of the above terms, it can be very difficult for members to understand their coverage. It is always best practice to speak to an expert (such as their health insurance broker) when reviewing their summary of benefits. If you would like to speak to an expert on the above, EVCO Insurance Services (925) 395-4566 is available by phone or via email at help@evcoinsurance.com