Decoding Insurance Policies: A Simple Guide to Understanding Your Coverage

Open Enrollment has finally come to an end! Mostly everyone who needed health insurance has now signed up for a plan. Now the only thing that stands between you and accessing the health care you need in the new year? The insurance jargon.

So here it is, a comprehensive explanation on how to understand your new insurance! If you’re looking for what the difference between co-insurance and copay is or how to understand when you’ve met your deductible or what even goes towards your deductible, this is the blog for you!

Health insurance basically involves an agreement between you and the insurance company where you pay them a monthly premium in order for them to have your back when it comes to paying for your health. You still pay for your care but your insurance is supposed to come in and help out with the expensive costs depending on your benefits, which are basically the “rules” that your insurance said they would or would not pay for. 

Health insurance doesn’t have to be confusing. This chart explains the most common costs and how they affect what you pay throughout the year. Please keep in mind that any out of network providers/visits as well as not covered procedures/visits will not count towards the Out-of-Pocket Maximum.

To start off, let’s define some basic insurance jargon: 

• Copay- This is the fixed amount you pay at the time of service. Keep in mind, this varies based on the type of visit (meaning if it is a specialist, the copay is usually higher than if you are seeing your PCP (aka Primary Care Physician), or how an ER visit will have a different (often higher copay) then if you were going to an Urgent Care). Not every plan has a copay but if you do, you need to be aware of it so that you know what to expect when heading to the doctors office as many offices collect the copay at check-in due to their contract with your insurance, though policies can vary. Also keep in mind that copays may apply for imaging or prescriptions.  

  It is important to note that this will often go towards the out-of-pocket maximum but NOT towards your deductible and still needs to be paid after the deductible is met. It is also important to know when your copay applies as for some plans, you do not need to pay the copay for certain visits such as your Annual Physical. 

• Deductibles- This is usually a part of the bill you receive after the appointment. When the insurance runs the claim they send a portion back to you saying that this is what you are responsible for. This is defined as the amount you pay before the insurance starts covering anything. So if you don’t go to the doctors office often, you might want a plan with a higher deductible because this will usually mean you have a lower monthly premium (you will pay less monthly). BUT if anything emergent happens, you will be liable for meeting the deductible BEFORE insurance starts helping out (we will address how to pick an insurance plan based on your lifestyle in a separate blog).

  For example, if your deductible is $500, this is the amount you have to pay before the insurance will begin covering the costs of your appointment. It is important to know however that there are some services that can be covered by your insurance BEFORE you meet your deductible (such as annual physicals) so make sure you are aware of when you will be needing to pay the deductible which means having an in-depth conversation with your insurance. Also keep in mind that if you use in-network providers, your insurance has already negotiated what’s called an allowed amount. This means that, even if a clinic bills $300 for a visit, insurance may only apply $100 toward your deductible. Insurance isn’t paying the remaining $200—instead, they’ve negotiated a lower rate so you are never responsible for the full billed charge. This helps protect patients from excessive or inflated costs.

  Keep in mind, your deductible (if you don’t change insurances) will reset every year and if you don’t meet your deductible, you WILL NOT be charged the remaining balance at the end of the year. 

  Additionally, if you have a family plan, you will have two different deductibles, the individual and the family one. Your family deductible is often higher than the individual. It is important to note, that if you meet your individual deductible, the insurance will pay only for you but if you meet the family deductible, the insurance will pay for everyone regardless of if you have met the individual deductible. When you pay for the individual deductible, this also goes towards the family one so you are paying for those simultaneously except all of the dependents on the insurance plan can contribute to this deductible as well!

  

• Co-insurance- Many people think that once they meet their deductible, insurance covers everything. This however, isn’t true if your plan includes coinsurance. Co-insurance is the percentage you pay for covered services after meeting your deductible. For example, if your co-insurance is 20%, you pay 20% of the visit and the insurance covers the rest. This is super important to keep in mind especially for hospital stays or imaging since it can really add up. 

• Out-of-pocket Maximum- This is super exciting because it is the total amount you can spend in a year towards your healthcare regardless of your co-insurance. This means that if you have met your out-of-pocket maximum and you are seen again, the facility bills the insurance as usual but you are not liable for any payment, not even for co-insurance. For this reason, when you see this number, know that, in the worst case scenario, this is the maximum amount you will pay no matter what. It is important, however, to know that monthly premiums and non-covered or out-of-network services usually do not count toward this amount.

  

Now, to put it all together, here is a real life example. Let’s say your plan has:

• Deductible: $1,500

• Copay: $30 (For PCP)

• Coinsurance: 20%

• Out‑of‑pocket max: $5,000

You break your arm, you were seen at an in-network hospital by an in-network provider, and total medical bills are $10,000:

1. You pay the first $1,500 (deductible)

2. After that, you pay 20% coinsurance, meaning on the rest of the $8,500 bills, you will pay 20% of this which is $1,700. Since you did not meet your out-of-pocket maximum, you are liable for this amount along with your deductible meaning you pay a total of $3,200 and the insurance will pay $6,800 of the medical bill. 

3. Once your total spending hits $5,000, insurance covers the rest but no matter how high the bill gets, you won’t pay more than $5,000 for covered care that year. 

So having said all of that, you will never be 100% free of paying for your healthcare but remember: YOU ARE IN CHARGE OF YOUR OWN HEALTH. It is okay to do your research and have an in-depth conversation with your provider on what is and is not necessary to prevent unnecessary charges. Also be sure to UNDERSTAND your plan to avoid any surprise charges. Have in-depth conversations with your insurance to understand your benefits, know what you do and don’t have to pay for and know what your copay is, your deductible is, and your co-insurance. Understanding your insurance is one of the most powerful forms of self-advocacy. Keep learning, keep growing, and remember to prioritize your health!