This has been an interesting year for me. I’m typically relatively healthy. My medical bills are usually just an annual physical, an annual skin check, and an annual “well woman” exam. I take a few prescriptions, but all are generic, so the cost is extremely minimal. So due to that, it’s been a few years since I’ve taken a good look at my health insurance coverage.
Now don’t get me wrong - every year, when changes are made to the plan, I take a look, make sure that the coverage is still good just in case.
This year, I’m finding out what just in case really means.
Okay, that’s probably a bit of an oversell - this year hasn’t been that bad. I’ve been going to physical therapy for an injury, and then in January, I learned that I had to have outpatient laparoscopic surgery for an unrelated issue.
I’m two weeks out from surgery and the bills are just starting to come in. As I read through my insurance company’s Explanation of Benefits, I realized I didn’t quite understand what the various terms meant, specifically Deductible vs. Out-of-Pocket Maximum. You hear people talk about meeting their deductible all the time. But what does that mean?
The amount you pay for covered health care services before your insurance plan starts to pay. With a $2,000 deductible, for example, you pay the first $2,000 of covered services yourself. After you pay your deductible, you usually pay only a copayment or coinsurance for covered services. Healthcare.gov
But that didn’t make sense to me because I wasn’t paying the full amount for the services. I was only paying my copay for some and a partial amount for others. That’s because the deductible isn’t the only part of the plan that defines what you pay. Some plans have other policies on what they will pay. For example, my plan will pay for 50 physical therapy visits and I only have to pay my $25 copay. My plan also covers my annual physical with no copay.
Because of all of these additional elements, I hadn’t met my deductible before, which was why I really didn’t know what it meant to meet the deductible. This year is different.
Okay cool. Sometime in February, I met my Deductible. Does this mean that I don’t have to pay any more for my health care? Not quite
Once you meet your deductible, that’s when the benefits of your health insurance plan really kick in. When you get a bill from a health care provider, you only pay a portion of the bill, and that is called coinsurance. So let’s say you get a $500 medical bill. Let’s say your coinsurance is 20% (check your plan to find out your percentage). For that $500 bill, your insurance company will pay $400 and you will only pay $100.
Yes, I know. $100 isn’t chump change, and if you’re hospitalized, your bill certainly isn’t going to be $500. Here’s where the big guns come in. Your insurance plan also has an Out-of-Pocket Maximum. This is the most you will be required to pay for covered medical costs in a year. (Note - the cost of the plan itself does not go towards your out-of-pocket max.) Once you reach your Out-of-Pocket Maximum, your insurance company will cover the rest of your medical costs for the year.
Typically, your less expensive plans have a higher Deductible and Out-of-Pocket Maximum. And of course, not everyone has a choice in which insurance plan they choose, but if you do, this is definitely something to consider. If you’re like me, you are typically healthy so you think these amounts don’t matter. Clearly, they do. You only have so much control over your health.
This is also a reason to closely monitor your health plan. If you are nearing the end of the year and have to have a minor procedure done, take a look at your insurance statements. Is the procedure expensive enough that you will hit your Deductible or Out-of-Pocket Maximum this year? If so, it may ultimately be cheaper to do it now. If not, consider pushing it into the next year, where it may or may not be cheaper, depending on your medical costs throughout the rest of the year. (Of course, don’t put off a procedure if it is not safe to do so. I’m talking minor procedures that can wait.)
For this year, I’ve met my Deductible. I’m hoping to not meet my Out-of-Pocket Maximum, but anything can happen. I’m definitely going to plan ahead, of course. For example, I normally see the Dermatologist for a skin check in December. This year, I’m going to go early, on the off-chance a spot needs to be removed. It’s all about knowing my benefits and how best to use them to save money and stay healthy.