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- Health insurance can be paid for by employers, the government, or individuals. It often involves some level of cost sharing between these parties
- Out-of-pocket costs are costs that individuals have to pay either when receiving health care services or on a periodic (e.g. monthly) basis. Just like other bills, they may be able to be paid with cash, check, debit card, or credit card
- Different health insurance plans are associated with varying levels of out-of-pocket costs
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When choosing a health insurance plan, it’s important to consider all of the costs that you could potentially be responsible for. Many health insurance plans require a monthly premium. The premium is the cost of obtaining the insurance, and it must be paid to keep the insurance active.
In addition, there are out-of-pocket costs. These can include a copayment, which you would give to a service provider at each visit, or coinsurance. Coinsurance refers to the percentage of costs that you have to pay for a service, and it can vary greatly depending on your specific coverage. Plans often have a limit to yearly out-of-pocket costs.
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Premiums
Premiums are paid directly to the insurance company on a scheduled basis. Often, premium payments are paid each month or twice a month. It can be convenient to have your premium taken directly out of your paycheck if you have employer-sponsored coverage.
If you get insurance through another means, you can work out an arrangement with your insurance company. Rather than pay each month, some people prefer to pay a few times a year or as a lump sum before the coverage year begins.
If you pay for your premium with post-tax money, you can deduct that amount when you file your taxes. You cannot take deductions for:
- Any portion of your premium that your employer or the government paid
- Any premiums paid with pre-tax money
When you itemize your deductions, you can only deduct the medical expenses that have exceeded 10% of your household’s adjusted gross income (AGI) or 7.5% of your AGI if you or your spouse is 65 or over.
Copayments
Many plans require you to pay a copayment when you visit a health care provider. This copayment can be $5, $15, $30, or any amount that the insurance company sets. Within the same plan, the copayment may be different for a doctor’s visit when compared with a lab service.
Providers may require copayments to be paid before you receive their services. Many offices accept various forms of payment methods for your convenience.
With plans offered through the Marketplace, certain preventive services are provided with no copayment required. Those services include:
- Blood pressure and cholesterol screening
- Diabetes Type 2 screening
- Immunizations vaccines
- Screenings for pediatric patients
Deductibles and Out-of-Pocket Maximums
In a given year, you’ll have a maximum out-of-pocket amount that your insurance company has set. This could be, for example, $1,000 or $3,000. After you’ve hit this limit, your insurance company will pay for any other expenses you incur.
Your deductible will also be set by your insurance company. If your deductible is $1,000, then you would have to pay your medical bills until you reach that amount. After that, you may only be responsible for a certain percentage of your future expenses. That percentage that you’re asked to pay is called your coinsurance.
For instance, if you have a 20 percent coinsurance, you would pay for 20 percent of any costs that you incur after you hit your deductible. The insurance company pays for the remaining 80 percent.
Typically, insurance plans with lower premiums have higher deductibles. Higher premiums, in contrast, are usually matched with lower deductibles. It’s wise to consider what your likely medical costs may be before selecting an option to pursue.
When it comes to paying your medical costs, the amount you’ll actually be billed depends on your insurance. The health care provider will come up with a cost for the services you’ve received, and your insurance will pay the allowed amount. This amount will have been previously determined for the service. If there is a difference between the provider’s charge and the insurance company’s allowed amount, you’ll likely be asked to pay the balance.
Cost Sharing for Premiums
Some employers pay for the entire portion of their employees’ health insurance premiums. In this case, that payment made by the employer for insurance purposes is not considered a part of the employee’s wages.
Other employers pay for a portion of their employees’ premiums. For example, the government pays for about 75 percent of their employees’ premiums.
Government Programs
Medicaid is a low-cost health insurance option for people making below a certain threshold. Since the program is left up to the states to administer, each state has set its own guidelines regarding income levels. States are allowed to charge premiums for:
- Pregnant women and infants with income at 150 percent of the federal poverty level or above
- Qualified disabled and working individuals with an income over 150 percent of the federal poverty level
- Certain disabled working individuals and disabled children
Under Medicaid, the following services do not require any out-of-pocket costs:
- Emergency services
- Family planning and pregnancy-related services
- Pediatric preventive services
Medicare is a program that provides coverage for certain people age 65 or older and certain people with disabilities. Most of the people who are eligible don’t have to pay any monthly premiums for Part A Medicare, but they do have to pay other out-of-pocket costs.
The basic premium for Part B is $134, but this can increase if you have a higher income. You can check out your options regarding Parts C and D, as the out-of-pocket costs can vary significantly.
Financial Assistance Through the Marketplace
When purchasing a plan through the Marketplace, you may be eligible to receive financial assistance. In most cases, you’ll find out whether you qualify when you apply.
Different regions have different Marketplace plans available, so you should do some research to determine which plans may be the most ideal for you.
– Premium Tax Credits
Households whose income falls between 100 and 400 percent of the federal poverty level can qualify for premium tax credits. These credits can go directly from the government to your insurance company. If you would like your monthly premiums to go down, you can apply these tax credits in advance.
People who take too many credits or not enough credits during the year can reconcile their balance during tax season.
– Cost-Sharing Reduction
Those who are enrolled in Silver plans through the Marketplace can also be eligible for further savings. Cost sharing reductions can lower your annual deductible along with lowering your copayments.
When looking at health insurance plans, you should consider all of the costs that you may have to pay in the upcoming year. Those costs include premiums, copayments, and coinsurance. Each plan has set its own deductible and out-of-pocket maximum.
If you experience a condition that requires many visits to a service provider, these limits are important to consider. People that only expect to receive preventive care or basic services will likely pay a minimal amount in terms of copayments and medical costs in addition to paying their premiums.
Find Affordable Health Insurance without Compromising
Taking the time to compare the health insurance that is available to you can help you select the right choice. Enter your zip code below to start comparing free quotes now!
[su_spoiler title=”References:” icon=”caret-square” style=”fancy” open=”yes”]
- https://www.irs.gov/taxtopics/tc502.html
- https://www.healthcare.gov/preventive-care-adults/
- https://www.healthcare.gov/preventive-care-children/
- https://www.healthcare.gov/glossary/deductible/
- https://www.irs.gov/businesses/small-businesses-self-employed/employee-benefits
- https://www.opm.gov/healthcare-insurance/healthcare/reference-materials/reference/cost-of-insurance/
- https://www.medicaid.gov/medicaid/cost-sharing/index.html
- https://www.medicaid.gov/medicaid/cost-sharing/cost-share-exemp/index.html
- https://www.hhs.gov/answers/medicare-and-medicaid/who-is-elibible-for-medicare/index.html
- https://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html
- https://www.healthcare.gov/glossary/premium-tax-credit/
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