To sign up for a private health insurance plan, you typically have to pay a monthly premium. It’s far more likely that you can afford health insurance than that you can afford to pay for a surgery, illness or emergency room visit out of your own pocket.
Private health insurers usually offer a variety of plans with different premiums in order to reach a wide range of income levels.
If you can’t afford a private health insurance plan, you might be eligible for a government health insurance plan, such as Medicaid or Medicare. Or you might be eligible for subsidies (i.e., financial support) on the healthcare.gov Health Insurance Marketplace.
Health insurance doesn’t cover everything, though. Apart from paying your monthly premium, there are several forms of cost-sharing in most insurance plans. We’ll go over them below and explain how they work.
First there’s the deductible, which is the amount of health care costs you have to pay for before the insurance plan starts sharing those costs. So, if your plan’s deductible is $1,000, then you have to cover the first $1,000 of medical costs before your health insurance plan begins picking up its share of the bill.
Insurance plans often have you pay a copay when you see a doctor. There can also be a coinsurance arrangement where, for example, you pay 20% for some medical bills and the insurance plan picks up the other 80%. Copays and coinsurance typically come into play after you’ve met your deductible (though sometimes they’re at work even before you’ve spent that amount).
Finally, there is the out-of-pocket maximum (or maximum out-of-pocket). That’s the amount of money that, once you’ve spent it on health care costs in any year, the health insurance plan pays for 100% percent of your health care bills. All you pay is your monthly premium.
Here’s an example of how it works with numbers plugged in. We’ll call it the “Ten Plan”, and keep the number simple.
Ten Plan (example)
• $10 Copay (after deductible met)
• 10% Coinsurance (after deductible met)
• $1,000 Deductible
• $10,000 Out-of-pocket maximum
So, in the Ten Plan, apart from paying your monthly premium, you’re going to pay out of pocket for the first $1,000 of your health care costs (i.e., your deductible). That includes doctor visits, lab work, x-rays, surgery, physical therapy, everything. After that, though, you’ll only pay $10 per doctor visit, and only pay 10% of other health care costs.
And, if you wind up spending $10,000 altogether in a given year, your health insurance plan picks up the cost of everything for the rest of the year. All you pay is your monthly premium.
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