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What health insurance consumers need to know about cost-sharing

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Understanding out-of-pocket costs

From deductibles to coinsurance, cost-sharing is a key feature of health insurance plans today. Cost-sharing refers to out-of-pocket costs, and it is important to understand what you will be expected to pay. Understanding cost-sharing is necessary to compare different health insurance plans.

Some consumers may remember the days of full health insurance coverage, sometimes also called “first dollar coverage,” where out-of-pocket costs were minimal or non-existent. Today, this is extremely rare. Almost every health insurance plan will include some level of cost-sharing.

Here’s what consumers need to know.

Understanding cost-sharing

The most important terms to know are deductible, coinsurance and out-of-pocket maximum. Typically, plans that have higher cost-sharing—meaning you pay more out-of-pocket to receive healthcare—have cheaper premiums.

Deductible

This is the amount you must pay in full before your health plan kicks in to cover a portion of your medical expenses. If your deductible is $2,000, you will pay all of your medical bills until you hit $2,000. But it’s important to note—that doesn’t mean you stop paying for healthcare after your deductible is met.

Coinsurance

After you meet your deductible, you will pay a percentage of additional bills. For example, let’s say you meet your deductible, but then receive another $1,000 medical bill. If your coinsurance is 20 percent, you will pay 20 percent of that $1,000, which comes to $200.

Out-of-pocket maximum

This is the maximum amount you will spend on covered services. After you meet your deductible, you will pay your coinsurance until you hit this amount. However—it’s worth repeating that this applies only to covered services. Your insurer may cover little or none of non-covered services, even if you have already hit your out-of-pocket maximum. That’s why it’s important to familiarize yourself with what services are covered and which hospitals and providers are covered under your plan.

If you do receive services at an out-of-network hospital, your insurance company might pay a portion of the bill, and the hospital will charge you for the rest. This is called balance-billing and it is another form of cost-sharing, though it can often be avoided by making sure you visit in-network hospitals.

Again, plans with more cost-sharing typically have cheaper premiums. If you don’t expect to use many healthcare services next year and want more affordable premiums, a high deductible plan might be the best fit for you. However, if you have a chronic condition or otherwise expect to use more healthcare services, you might want to pay more in premiums for fewer out-of-pocket costs. Learn more about whether a high deductible plan is right for you.

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