There are a number of factors to consider in choosing the health care plan that works best for you. Over the years we have developed simple guidelines which help us assist our clients. These are the factors to be considered in your choice:
1. Office Visit Co-Pay: By co-pay is meant how much you pay the doctor every time you visit him. Example: if you see under the heading in the plan “Office visit co-pay: $20.00.” That means every time you visit the doctor, he charges you only $20.00 for the visit.
2. Annual Deductible: This is defined as the amount of medical bills you pay from January 1st till December 31st before the insurance company starts paying. Example: A health insurance plan has an annual deductible of $1,000.00 for hospitalization, x-rays and lab work. During the year of 2004, Joe had a total medical billing amount of $5,000.00. In that scenario, Joe paid first the deductible which was $1,000.00, then the insurance company paid the remaining bills.
3. Co-Insurance: Defined as the percentage you share with the insurance company in the payment of bills, usually after you have paid the annual deductible. Example: In 2004, Joe had total medical bills of $5,000.00. Assuming Joe has an annual deductible of $1,000.00 and a co-insurance of 40%, Joe paid the first $1,000.00 and then paid 40% of the remaining $4,000.00 The insurance company paid its 60% share and the bills were paid in full. Joe paid $2,600.
4. Annual Out-of-Pocket Maximum: This is defined as the total amount paid out of your pocket annually, including your annual deductible and co-insurance combined. Example: assuming your health insurance plan has an annual out-of-pocket maximum of $5,000.00, let’s say Joe had total medical bills of $20,000.00 in 2004. Joe’s health plan has a $1,000.00 deductible and a 40% co-insurance. Joe pays the $1,000.00 deductible, then he pays his 40% co-insurance of the remaining bill, which is 40% of $19,000.00 = $7600.00. That makes a total of $8,600.00 from Joe’s pocket: the deductible of $1,000.00 + a co-insurance billing of $7,600.00.
But does he really owe $8,600.00 in medical bills? The answer is no! Because Joe’s annual out-of-pocket maximum as mentioned above is $5,000.00, Joe only owes $5,000.00 in medical bills because that is the maximum Joe will pay in a year no matter how high his medical bills are. The annual out-of-pocket maximum is your safety net, in case of a major catastrophic event where your medical bills are very high. As insurance brokers, our mission is to bring creative benefit solutions and benefit expertise into the workplace through one on one contact with employers and their employees. Whether the communication is at the work site, over the phone, at bilingual meetings, or online conferences, the information delivered will be directly from the experienced benefit planning staff of Culter Insurance Services in order to meet the benefit planning needs of our employers and their employees.
Making the Right Choice Now that you know what these factors are, how do you use them to make a decision? What to look for first in a health insurance plan is the annual out-of-pocket maximum – your safety net. Then the annual deductible, the co-insurance and, lastly, the doctor’s office visit co-pay. Here is an example of how to make a plan choice based on the factors described above:
Scenario A: The health insurance plan has a $40.00 office visit co-pay, a $2,000.00 annual deductible, a 40% co-insurance and an annual out-of-pocket maximum (your safety net) of $4,000.00
Scenario B: The health insurance plan has a $20.00 office visit co-pay, a $1,000.00 deductible, a 30% co-insurance and an annual out-of-pocket maximum of $8,000.00
Considering what you have learned so far, which health insurance plan do you consider better? The one in scenario A or B? To find out for yourself, take different examples considering the amount of total medical bills for that year and use some math to come up with an informed conclusion on which plan is better and more suitable to your needs. If you use the example mentioned above with $20,000.00 of total medical costs for the year, you will discover that the health insurance plan in scenario A is better than the one in scenario B.
We hope this information has been of assistance to you. We are always willing to help, so don’t hesitate to contact us.