Health insurance coverage is one of the costliest benefits an employer provides its employees, with premiums, deductibles, copays, and coinsurance all increasing rapidly in recent years.
Know your premium, deductibles, cost-sharing expenses and maximum out-of-pocket limits so that you can make an informed choice regarding which health plan is right for you.
Premiums
Premiums are monthly fees you pay to keep your health insurance plan active, which may either be set as a fixed amount or as a percentage of your monthly income.
Premium costs should be taken into consideration when choosing a plan, so selecting one that meets your budget is key. But keep in mind that they represent just one part of overall medical expenditures.
Premiums may depend on the network your plan uses; typically HMOs impose stricter restrictions regarding which doctors you can see and what must happen before receiving medical care; while PPOs and EPOs allow access to any doctor.
Deductibles
Deductibles are an integral component of health insurance plans. As the first cost you incur before being covered by your policy, deductibles should typically be reviewed annually and set accordingly.
Once you meet your deductible, most health insurance expenses are taken care of by the plan; however, if you visit a doctor and undergo procedures that your plan requires a copay for.
Over the past decade, average costs for deductibles have steadily increased. Estimates suggest premiums and deductibles accounted for 11.6% of median household income in 2020; in 37 states they comprised 10% or more (Table 1).
Copays
Copayments are cost-sharing payments you make each time you visit a doctor, receive prescription drugs or use other services. They can vary depending on both type of service and plan.
These fees may be applied before or waived altogether for certain services like preventive care.
A typical copay for an office visit at a physician is $25 while for visits with specialists the average copayment is $42.
Your medical costs depend on the type of policy and medical providers/practices you select, including any networks of doctors/healthcare providers that agree to reduce their rates if used by you. Some plans offer these discounted services through network plans.
As health care spending becomes an ever-increasing portion of household budgets, premium contributions and potential spending on deductibles have increased faster than wages over time (Table 2). By 2020, the average total cost of premiums plus potential spending on deductibles across single and family policies reached $8,070 on average.
Coinsurance
Average health insurance coinsurance fees typically range between 20-25% of total costs, depending on the plan you select and type. A 20% coinsurance fee means you cover 20% of medical bills while insurer covers 80%.
This percentage applies to doctor visits, lab work and prescription drugs; its value may also depend on whether you see an in-network or out-of-network provider.
Example: Your copay could be $20 for routine visits to a physician’s office; however, an additional 20% coinsurance payment would apply if an emergency room visit or other services are required.
Coinsurance percentage is an essential feature of most health plans; but, to make an informed decision before signing on with one, it’s wise to familiarize yourself with its function first.
