Insurance can be confusing and hard to understand. All kinds of terms and rules. Of course, you probably grasp the concept of copays and deductibles, but then they throw in other terms like coinsurance and out-of-pocket expenses. What do these terms mean, and how do they affect how much you pay for your child’s therapy?
Here is a brief explanation, so you can understand how they all work.
What are copays and deductibles?
Let’s review copays and deductibles to make sure you understand how they work.
Your copay is the amount you pay for pediatric medical and therapy services. For example, you might pay $25 for a pediatrician visit, and $50 for a specialist visit.
Your deductible is the amount you must pay before your health insurance covers all or a portion of the bill. If your deductible is $5,000 a year, you must pay that amount on your own before your insurance will cover some of the remaining expenses.
What is coinsurance?
Coinsurance is a fixed percentage that you must pay for each service or visit. The rate might be 20%. This means you are responsible for paying 20% of the allowed amount set in the contract with your provider and insurance company. Meanwhile, your insurance plan pays the remaining 80%.
Here’s the tricky part, and what often leads to confusion. Coinsurance applies after you have hit your deductible. In other words, even after you have reached your deductible, you will still likely have to pay a percentage of the bill.
What is an out-of-pocket maximum?
The out-of-pocket maximum refers to expenses you are required to pay out of your own pocket during a calendar year. The amount is the most you will pay for covered health care expenses. It effectively puts a cap on how much you have to spend every year. Once you have reached the out-of-pocket maximum, your insurance pays 100% of the remaining costs.
Note: Your monthly premium does not count toward your out-of-pocket maximum, but all copays, deductibles, and coinsurance do.
Here’s an example of how it works:
Out-of-pocket maximum = $6,000
Deductible = $4,500
Coinsurance = 20%
In this situation, you would pay the first $4,500 as a deductible, then 20% of the allowed amount at each visit. However, if your out-of-pocket maximum is $6,000, you are only responsible until you reach that total amount. There is usually an individual out-of-pocket and a family out-of-pocket, which combines all the enrolled members. As with everything regarding insurance, the out-of-pocket maximum varies widely from plan to plan.
How does a visit limit apply?
There are certain plans that also incorporate a yearly visit limit. Once those visits have been exhausted, you have the option to request more visits from your insurance company. If they decline, you will be responsible for visit charges. Some offices have certain rates for cash paying patients.
While these are the most basic of terms and concepts regarding insurance, it’s a good start to understanding how your insurance works. We always suggest reviewing your benefits package on your own or contacting your Human Resources department for specific questions about your plan. Our administrative staff is available to answer any further questions or walk through special situations that can come up. Please don’t hesitate to ask, we’ll happily guide you in the right direction.