Understanding Your Health Insurance: Know the Difference Between Your Deductible, Out of Pocket Maximum, Co-Pay & Coinsurance

When it comes to understanding the costs of your insurance, we understand that there’s a lot you need to know. From learning what’s covered and what’s not, to how much you have to pay and what number you need to call when you have questions, sometimes it can feel like it’s just you against the world.

Maybe you just got new insurance and are trying to keep up with all the changes. You may have been dealing with a $15 co-pay before, but now you're looking at the word 'coinsurance' and wondering what the heck is happening. Perhaps you've had the same insurance for years, but, if you're being real, you couldn't give an honest answer on what the difference is between your deductible and your out-of-pocket max. Needless to say, the world of health insurance can seem like a giant pit of complexities that you'll never understand. Fortunately though, there are ways to get started. That's why today, we're going over the basics. 

Our colleague, Dr. Michael Lell, sits on the Oregon Chiropractic Association’s Board of Directors and is an adjunct lecturer at the University of Western States. As a member of the medical field and as a professor specializing in insurance billing, he knows a thing or two about helping folks like us to better comprehend our health insurance and how we can benefit from it. He explains that knowing the costs of your insurance can be tricky, but that it's certainly not impossible. “Nearly all insurers have an online portal for their customers, making the details of your plan easy to find,” he tells us. “If you don’t have an online portal, most of these details are also listed on the back of your insurance card.” That's definitely a great place to start. 

Lell also explains that, as a courtesy, “offices will do the leg work for you and explain your benefits ahead of your first appointment, but ultimately, it’s your responsibility.” In other words, the one person who can get you all the information you need regarding your insurance is you. But before you get started, we want to prep you with the basic terminology you’re going to need to know ahead of time. We call them the Four Fundamentals: Deductible, Out-of-Pocket Maximum (OOP), Co-Pay, and Coinsurance, starting with your deductible.

A deductible is the amount you pay for healthcare services before your insurance kicks in. For example, if your deductible is $3,500, you’ll pay out-of-pocket for healthcare services until that number is met, after which, all you’ll need to pay is your co-pay and/or coinsurance, depending on the plan you’re on. Some plans, however, cover certain benefits before you meet your deductible, meanwhile all plans offer a selection of preventative services such as flu shots and screening tests at no cost to you.

Now let’s dive into the Out-of-Pocket Maximum. Most people will ask, “What does that have to do with my deductible?” They’ll even wonder if their OOP is just a second deductible. At that point, the stress begins to sink in that perhaps this whole insurance thing looked a whole lot better on paper. But the truth of the matter is that your OOP is not a second deductible. In fact, your deductible is a part of your OOP. So how does that work?

Your OOP is the payment cap – in other words, the most you’ll ever have to pay for uncovered services before your insurance takes over. So let’s say your deductible is still at $3,500 and you happen to meet that number. Your insurance now only requires a $25 co-pay for office visits. But maybe you get sick – a lot. Maybe you get into an accident. Maybe your kid spills his juice box and before you know it, you’re lying on the floor, covered in sticky Tropicana and hurting all over. Maybe you’re finding yourself having to go to the doctor way more than you ever thought, and now that occasional $25 co-pay is becoming a 3-times-a-week money pit that’s no longer seeming worth it to you. That’s where the out-of-pocket max comes in.

let’s imagine that you have an OOP of $4,000. Your deductible of $3,500 has been met and is included in your deductible. Therefore, if we do a bit of subtraction, that leaves us with $500 of fees leftover before that $4,000 is met and your insurance covers even that $25 co-pay. Now, when you go to the doctor for that bug bite you realize is more than just your average bite, your total cost for the visit will be $0.

Of course, every plan is different, which is why, as Dr. Lell tells us, it’s important to get in contact with your provider to see what services apply to your OOP and which ones don’t. This can vary from regular office visits to outpatient services to visiting a specialist. Which brings us to the topic of co-pays and coinsurances.

Simply put, your co-pay is the fixed amount you pay for covered medical services after your deductible has been met and before your OOP has been met. Your co-pay may vary depending on the type of service you receive. For instance, once your deductible has been met, you may be looking at a $15 office co-pay but a $30 co-pay when seeing a specialist. Check with your insurance as well as your service providers prior to your visits to see what services are covered in your co-pay and which ones aren't. These are good things to know ahead of time, as no one likes to be that person stuck at the check-out window with a bucketload of charges they thought were covered. Talk about awkward.

Next up: the coinsurance. This is similar to a co-pay, however the number you pay is not a fixed amount. Rather, it’s the percentage of total services that you’re required to pay once you've met your deductible.

We said before that some insurances require you to pay either a co-pay, a coinsurance, or both, depending on the services provided. An example of this would be when visiting a chiropractor. Your insurance specifically mentioned that for chiropractic care, you have a $30 co-pay after meeting your deductible. However, physical therapy is not a part if this co-pay. Instead, it requires a 20% coinsurance in addition to your co-pay. That means you pay your co-pay plus 20% of all the physical therapy services you receive. These payments are then included in your OOP, bringing you that much closer to receiving total coverage. Make sense?

These are just the basics when looking to understand the costs of your insurance, but with these four building blocks to get you started, you'll be well on your way to understanding all the ins an outs of your health benefits. If you're looking for a great next step in the learning process, Dr. Lell recommends going online to www.healthcare.gov/blog/understanding-health-care-costs. There, you'll find a wealth of information pertaining to every aspect of your health insurance. It's our hope that in better understanding how your insurance works, you can take full advantage of all your benefits has to offer. 

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