How Are The Costs Of Your Medical Insurance Plan Worked Out?

Unless you are familiar with health insurance then the costs involved in a health insurance plan might appear to be a little complex and many people are surprised that, after they have paid what seems like an arm and a leg, they find themselves landed with a bill the very first time they submit a claim. So before you are hit with a large medical bill therefore, it might be a good idea to take a minute to understand just what goes to make up health insurance plan costs.

The first and probably most obvious cost is the monthly premium or, if you so choose, the quarterly or annual premium. If you are enrolled in an employer's or union group insurance plan then you will generally be asked to meet only a percentage of the premium and this will normally be taken directly from your pay check.

Most medical insurance plans also include an annual deductible which is a sum of money which you will have to pay before your insurer starts to pay out on any claims. So, with an annual deductible of say $1,000 you will have to meet the first $1,000 of your medical bills every year before the insurance company will begin paying out. You may be familiar with paying a deductible from your experience with car insurance and, if so, will know that the higher the deductible on your plan the lower your premiums will be. If you have a family health plan then this will often include multiple deductibles for the individual members covered under the plan.

Many medical policies will also include a co-payment which is a fixed amount of money that you will need to pay towards every medical bill. Just how much you will need to pay in co-payments will depend to a large extent on the type of plan that you have. For example, co-payments on HMO plans are frequently less than those on indemnity plans. In addition, the co-payment can also vary between different forms of medical service and, if you have an HMO plan, will normally increase if you seek treatment outside of the HMO network.

In cases where no co-payment is required you will often find that this is replaced by co-insurance which is similar and is a sum of money, in this case expressed as a percentage, which you will once again have to pay towards every medical bill. A normal co-insurance ratio is 80/20 which means that your insurer will pay 80% of each medical bill while you pay 20%. As with co-payments, co-insurance will usually rise if, as an HMO plan member, you are treated outside of the HMO’s network. In this event you may also find that, whenever a claim exceeds what the insurance company considers to be 'reasonable and customary', you might be required to pay the additional cost.

By this time you will realize that comparing medical insurance policies is about a great deal more than simply comparing plan premiums. As a consequence, it is critically important for you to read the details of any health insurance quote very carefully and that you avoid the frequent temptation to simply choose the plan which has the lowest monthly premium.

If you want to keep costs down and are in an HMO plan then you should try to remain within the HMO’s network and, when you do feel that it is necessary to go outside the HMO's network, then compare actual treatment costs to what the insurance company considers to be 'reasonable and customary' before you agree to treatment.

It is also possible to keep your costs under control on many plans by raising or lowering the deductible and by selecting higher or lower co-insurance. Exactly how this can be done is beyond the scope of this brief article but is a matter of balancing the various different costs against the probability of needing to make a claim on the plan.

This might appear to be somethat complicated but a good understanding of the various different costs that make up your overall expenditure is very important when it comes to getting a good deal and finding the best low cost medical insurance plan.