You might think your insurance will be a gentleman and pay for dinner, but the company will probably split the bill or make you pay the whole thing instead. After this episode though, you’ll be able to tackle the basics of health insurance like deductibles and copays without a problem.
Understanding your medical insurance might feel like scaling a sheer cliff. Once we cover the basic concepts you’ll have enough hand- and foot-holds to do that climb. Before we start that let’s check out the big picture. The concept of insurance should matter to you because in 2020, just over 91% of all Americans had medical coverage during all or part of that year. Employers are still the biggest customers for insurance, covering around 55% of the population. Medicare, which is handled by the government, covers the next 18% of Americans. These stats all come from the most recent US census. This all means that medical coverage will touch you or be offered to you in some way. That or you’ll have a sleek-looking insurance card that doesn’t actually cover anything. Regardless of whether it’s publicly or privately funded, health insurance still has a few core mechanics, all of which are based on the idea of “medical necessity,” which is a broad phrase by design so the insurance can justify paying or, in most cases, not paying for your care. Once we know the lingo, it’s easier to grasp different styles of plans.
I linked a couple glossaries of health plan terms from the Bureau of Labor Statistics and UPenn’s student health service on my Substack home page, which you can find at rushinagalla.substack.com.
Now we can go ahead and master three major pillars of coverage: copays, coinsurance, and deductibles. Copays are easier on the uptake—they’re just a fixed payment you make on the same day you are seen by the provider or medical facility you go to. For example, your insurance says that you have to spend $50 for a copay when seeing your primary doc. However, the first curveball here is that your copay can vary across different services. That $50 copay for your primary doctor can turn into a $100 copay at a specialist. In any case, you can just think of copays in terms of dollars.
The next concept to attack, coinsurance, turns up the heat a little bit, but I’m confident you can handle it. Think of coinsurance as a percentage that you want to keep as low as possible. For a regular visit your insurance might say that you need to pay 30% of the bill before the rest is covered. That percentage would definitely vary between seeing a preferred provider or someone who’s out of network (i.e. a provider who does not accept or have a deal with your insurance company). Your insurance can still make you responsible for more costs even after you pay coinsurance if the provider bills for something that the health plan won’t cover no matter what (like a cosmetic enhancement or removal).
Let’s move on to the infamous phenomenon that is the deductible. Think of it like a comically expensive toll gate. A deductible is a minimum figure you need to spend on your healthcare before insurance covers anything. My insurance for example demands that I spend $1000 out of pocket during the year on regular visits and services. Depending on the health plan you can have multiple deductibles for individuals, families, different services, and out-of-network care. Even though I haven’t met a single person who enjoys them, deductibles are common in health plans with low premiums. The premium is just the monthly fee you or your employer pays to have medical coverage in the first place. There is some good news in all this: a decent number of health plans can still fully cover preventative care visits, like seeing your primary doctor, without forcing you to pay a deductible. It’s like having the privilege of free drinks and a table at the clubhouse where you pay thousands a year for membership. I’m going to link a useful article from Verywell health on my Substack, again found at rushinagalla.substack.com, that covers those nuances further.
Believe it or not, there is a light at the end of the tunnel where your insurance covers just about everything. That light is the out-of-pocket maximum. This is best served with an example. If your health plan has a coinsurance of 20% and you get an eye-watering $100,000 hospital bill, you would think that you need to pay $20K (=0.2 * 100,000) before any coverage happens. But if you happen to have an out-of-pocket max of $10K for the particular hospital work you got, then your insurance picks up the other $90K if you have met all other copay/coinsurance/deductible obligations. This sounds all well and good but you probably have an out-of-pocket maximum just for in-network providers and emergency services. If you know you’re getting something complicated in the near future like a knee replacement or extended drug therapy, it’s smart to call the number on the back of your insurance card to ask for what your out-of-pocket max would be for a given medical situation. Most insurers will also slap on a lifetime limit. This reflects the fact that your insurance will only pay a certain amount for you, usually in the single-digit millions, over the existence of your membership. So if you wake up one day and want to replace your body parts with some flashy cybernetics for a few million bucks, just keep in mind what your lifetime coverage is and whether or not particular services are included with coverage.
But to get back on track, let’s just do a quick recap before we close things out. Long story short: think of copays with dollars, coinsurance with percentages, and deductibles with toll gates. The plot twist here is that your insurance may combine two or three of those payment types. So just be aware that, for example, you could have a $2000 deductible then 10% coinsurance for everything after that.
For now though, we’ll take a break from insurance side of things and shift back to medical care. Knowing when to seek private healthcare or hospital and corporate healthcare is the next thing we’ll talk about so you can take advantage of the coverage you do have! Subscribe to Friendly Neighborhood Patient for more healthcare tips and tricks. I’ll catch you at the next episode.
