Demystifying Health Insurance Terms And Coverage
The world of health insurance seems to be one of the most complex things in our society today. Understanding coverage, benefits, terms and responsibilities can be confusing to even the savviest of customers and these things can also vary greatly between policies. For people with health insurance coverage provided by an employer, you are at the mercy of your company’s decisions for health insurance coverage—and this can change at any time as well, leaving you in a sometimes unpleasant situation of needing to change doctors or other providers simply because of an insurance change. With such ramifications at stake, it is important that, as a consumer, you educate yourself and work to understand some of the basics of health insurance so that you are ready to make the most informed decision at any time about your coverage.
Deductibles—Or Is It First Dollar Coverage?
“Deductible” is a term used by any type of insurance from health insurance to automotive insurance to homeowners insurance and more. However, in the case of health insurance, the deductible can be confusing. Let’s say that you have a health insurance plan with a $5,000 annual deductible. That does not always mean that you have to pay the first $5,000 worth of expenses before the policy provides any coverage (which is the way it works with car insurance, for example). Instead, most health insurance policies have some form of a co-pay system for routine or even emergency care situations. The insurer is required to cover any part of the non-co-pay cost from the very beginning.
Co-Pays And Deductibles
While many people may think that any co-pays you incur go toward meeting your annual deductible, this is not correct. The co-pay is simply a contracted amount and is to be paid separately from anything to do with the deductible. All costs beyond the co-pay, however, will apply to the deductible for that given calendar year.
Period Of Coverage
For most health insurance plans, a typical period of coverage is based upon the calendar year, running from January 1 to December 31. This means that any deductible is to be calculated between these dates only and on the following January 1st, the slate is wiped clean and a new deductible “goal” will be restarted. This also means that if you start coverage on your health insurance plan partway through the calendar year (for example, in May), you have only seven months to reach your full deductible before your health insurance plan covers all additional costs. While this may not seem quite fair, it should be noted that your insurance company only collects premiums from you for those same seven months for that first year.
One of the likely reasons that the “year” designation for health insurance coverage is based upon a calendar year is a logistical one. Most people have health insurance provided by an employer. Imagine an insurer having to track when every single employee on a given plan signed up for health insurance and track a different start and end date to the deductible year and you can quickly see the benefit of the calendar year default system.
Out Of Pocket Maximum
The “out of pocket maximum” (OOP) is yet another nuance in the world of deductibles and co-pays. It usually refers to the total medical costs you would be responsible for in a given calendar year before your policy pays all exepenses 100%. As with the deductile, your office or other co-pays are not part of this. In other words, you can expect to always owe your co-pay no matter what other amount you have paid through the year.
When you start to understand the specific terms and language of a health insurance plan, you can better assess which plan is right for you and your family and, therefore, you can prevent many problems down the road.