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In today's marketplace, it pays to shop around for your health insurance coverage.  There are many different plans from many different companies who all want your business. If you are unsatisfied with your current company, or have put off buying a health insurance or healthcare plan, now is the time to take control.  With our numerous affiliations, you can shop from most all the top companies without ever having to leave your home or office.

EGS would rather it's clients be informed buyers than to simply sell insurance and added benefits that the client may not need.  Therefore we are presenting this information as a helpful guide for you to make an informed decision on which plan to buy and which benefits to include. We are not attempting to persuade you to either include or exclude certain benefits from your health insurance plans.  We simply want you to make the right decision for you and be happy with your selection.  This guide is presented in general terms and attempts to explain how health insurance plans work.  Not all plans work equally nor does this imply that this information is valid in all states or situations.  It does however, give the general workings of many health insurance plans and how deductibles, coinsurance, and copays function.

Copay  The copay that comes with many of today's health insurance plans is often referred to as the Doctor Office Copay.  In most cases, the copay is an added benefit where the insured person only has to pay the low ($15, $20, $30, etc..) for doctor office visits.  The Deductible of the health plan does not usually have to be met for these charges.  The insured can just pay the copay for doctor office visits and not have to satisfy the deductible of the plan.  This copay however, just applies to the doctor office visit charges and usually does not apply to any charges the physician would bill for outside facility charges such as radiology, blood tests, etc...  

For example:  If the insured goes to the doctor for let's say a case of the flu.  The doctor might run blood tests or even do an x-ray of the patients lungs.  The bill would therefore consist mainly of a doctor office charge, a lab test reading, and a radiology charge.  The copay would usually only apply for the doctor office charge.  The radiology and the lab screening would go towards satisfying the deductible and coinsurance levels of the policy.  We will handle the Coinsurance term later in this discussion.  Let's say the doctor office charge was $90, and the remaining charges add up to $250, and the insured had chosen a $20 copay for their plan.  The $90 would be taken care of with a $20 fee paid by the insured.  There should be no balance left and the remaining $70 of the doctor office charge would be $0.  The $250 remaining charges would be the responsibility of the insured, assuming that the deductible of the plan had not yet been met for the year.  Essentially the insured only saved a total of $70 on the visit.  Sounds like quite a savings right?  Well maybe not!  The insurance premium that is paid by the insured every month includes a charge for having this Copay benefit on the policy.  For example:  The monthly premium for the insured is let's say $280.  Let's also assume that $40 of that monthly premium is for the doctor office Copay benefit.  That insured is paying $480 per year for a benefit that only saves them, in this scenario, $70 per visit.  For this benefit to be cost effective, the insured would have to visit the doctor nearly 7 times per year for the benefit to be worth what they are paying for it.  Now keep in mind that these insurance levels are per person.  Therefore, a large family might well benefit by the added insurance of a Copay, especially if there are several children on the plan.  Like was mentioned at the top of this article, not all plans work the same and these numbers are just examples.  The person purchasing insurance should breakdown these numbers and evaluate whether the benefits is worth the cost.  A Copay benefit can be a significant portion of the premium that the insured pays each month.  Remember that the lower the copay the higher the cost.  Most plans give the insured the ability to remove the copay benefit altogether, resulting in an even lower premium.

 

How Health Insurance Plan Deductibles Work!

Choose from the terms below to get detailed information on how each of these benefit options work.

Copays

Deductibles

Co-Insurance

Reducing Premiums

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Deductible  The term deductible is one that many insured's have heard time and time over.  In this article, we will attempt to explain how the deductible works within the policy and its relationship to other plan features.  Years ago, and still available today, there were few or no PPOs or HMOs.  Health insurance plans had a deductible amount that had to be paid by the insured before the insurance company paid anything.  The deductible is still much like what it has always been with the exception of added benefits such as Copays and Wellness Benefits Riders.  When you hear the term deductible, this is the amount that must be paid by the insured.  

For example let's use a plan with a $500 deductible and a Copay of $20 for doctor office visits.  For figure's sake, let also assume that you just started your plan and have not met the deductible yet.  You just visited the doctor for the flu and he also ran some blood tests and performed an x-ray.  In this instance we will also assume that $90 is the doctor's charge for office visits.  The $20 Copay benefit would take care of the $90 office visit and you would only pay the $20.  The insurance company would pay the remaining $70.  We will guess at a price for the x-ray and lab work at a price of $400.  These charges would be billed separately from the doctor office copay/visit.  In this case, with you not having met any of your deductible for the year, the remaining $400 would be payable by you to the physicians and facilities that performed them.  

Example 1.1

$90 Doctor Office Visit

You Pay $20

Insurance Co. Pays $70

$400 Lab & X-Ray Chg.

You Pay $400

Insurance Co. Pays $0

Now to carry this one step forward and to further explain this seemingly one sided arrangement, let's take another medical bill that you incur later in the year.  Well it's that time of year again and Strep is going around at your office.  You go to the doctor and are charged another $90 doctor office charge and of course a Strep test at $80 and also gives you a Penicillin shot.  The shot will likely be billed as a surgical procedure for the actual act of sticking you with the needle at a charge of $75.  Please remember that these amounts are just made up for the sake of the example.  

This time the $90 is once again covered by the $20 copay and the insurance company pays the balance.  Now the $80 Strep test and the $75 injection total $155.  You have met $400 of your $500 deductible already earlier this year.  You would pay the remaining $100 of your deductible against the $155 in charges, leaving you with a remaining balance of $55 to be paid by the insurance company.  Sounds simple enough right?  There is more.  The remaining $55 would be carried over to the Co-Insurance level of the plan.  See example 1.2 below.    We will deal with the Co-Insurance term later in this article.  

Example 1.2

$90 Doctor Office Visit

You Pay $20

Insurance Co. Pays $70

$155 Lab and Injection

You Pay $100

Insurance Co. Pays at Co-insurance level.

Now your deductible has been met for the year and everything else will be paid according to the Co-Insurance level you chose when you bought the policy.  Typically the copays you made to the doctors office will not go towards satisfying your deductible.  Remember, the insurance company has already paid on these portions of the claims.

Co-Insurance   This term is one that is seldom used by the public or agents when speaking to the client.  It is not hidden, its is simply referred to many times as the type of plan you buy.  Most people know this as the 80/20, 80%, 50%, or 100% type of policy.  Most policies that we sell are either 80/20 or 50/50 plans.  These are the Co-insurance levels for the plan.  Now what that means.

When you see this on a policy or quote it is referring to the percentage the insurance company will pay on the charges that come after you have met your deductible.  Don't be afraid here!  Many clients ask who pays what percentage.  Typically plans will show the insurance company's portion first in this benefit description.  For example, an 80/20 plan would mean that after your deductible has been met, the next "x amount of medical charges" will be paid for at 80% by the insurance company and you will be responsible for the 20%.  A plan that is 50/50 would be a 50% split between you and the insurance company for the next "x amount of medical charges".  After this amount has been spent by you, the plan would typically pay at 100% for the remaining charges incurred up to a Life Time Maximum.  We can now say you have reached your Maximum Out Of Pocket for the year. The co-insurance levels and life time maximums all impact your premium.  Just as a higher copay lowers your premium, so will a higher deductible, and a lower coinsurance level.   If this seems confusing, don't feel bad.  It can be very confusing.  We have an example below to help better explain.

In this example let assume your plan has a $500 deductible, $20 doctor office copay,  80/20 to $5000 (referred to above as "next x amount of charges"), and a life time maximum of $5 million.  Just for ease of figures, let's assume you have not met any of your deductible.  Let us also assume that you go to the doctor and are diagnosed with a very bad lung infection and pneumonia that requires a hospital stay.

Example 1.3

To recap:  You paid the $20 for the doctor office charge.  You paid the first $500 and have satisfied your deductible.  You have also paid your 20% of the Co-insurance level from the remaining $100 left over from the Hospital Admission charge.  Now you are in the co-insurance portion of your policy and have met $100 (even though you only had to pay $20 or 20%) of the next $5000 in charges.  Assume you had to stay a few days and accumulated a bill, up and above what we have dealt with so far, totaling an additional $6500 in medical expenses.  See example 1.4 below.

Example 1.4

You have now satisfied your entire deductible, and co-insurance level of the policy.  The insurance has begun to pay at 100% up to the Life Time Maximum of $5 million dollars as it did with the remaining $1600 above.  You are said to have reached your Out Of Pocket.  In this case the Out Of Pocket limit would be $1500.  This number is achieved by adding your deductible of $500 to the 20% portion of the next $5000 in charges, which equals the maximum you can spend in any year of $1500.

Health Insurance Premiums   It is no breaking news that health insurance premiums are at an all time high.  There are many factors involved in this increase and many different opinions on what causes it.  There are also many ways to lower your insurance premiums significantly.  The insurance companies blame the doctors and the doctors blame the insurance companies, while others blame the legislature.  We do not argue that all these are factors in the high cost of health insurance.  However, the most obvious reason is that medical research, disease cure breakthrough, and the huge improvements in health maintenance are very expensive.  With that being said, we will leave that subject alone for now.  How do you lower your health insurance premiums?

There are lots of ways to decrease your health insurance premiums.  Health insurance plans today, have many bells and whistles or added benefits that you may or may not need.  By decreasing some of these extras, you can often significantly reduce your premiums and still have a very good policy.  Let's take the following example.

COPAYS

A $20 doctor office copay is much more expensive than a $25 doctor office copay.  A $30 copay is much less again, as is a $40 copay.  Let's assume that the premium associated with a $20 copay is an additional $38 per month in premium.  A $40 copay being an additional $12 per month.  No copay at all would of course be $0.

You would then be paying an additional premium of $26 per month to protect yourself against a "potential loss" or exposure of $20 each time you used the doctor office copay.  Please remember that these numbers are just made up for sake of example.  The point of this explanation is to encourage you to "do the math", when selecting benefits.

DEDUCTIBLES

Now let's put the Deductible under the glass and examine.  The higher the deductible, the lower the premium.  Make a judgment based on your own financial capabilities and not just on what "sounds" good on the surface.  Ok, now for the example with assumed numbers.

Let us assume a $250 deductible is more expensive by $100 per month, than a $750 deductible.  The deductible is probably the most effective way of managing your premiums as it impacts the premium more than just about any other optional factor.  In this example you are paying an additional $1200 per year to protect yourself against a "potential loss" or exposure of $500 more out of your pocket.  Once again, it pays to do the math.  Many insured's find that raising the deductible saves them hundreds and even thousands of dollars yearly without exposing themselves to much more risk.  Risk is really the subject here.  How much risk are you willing to take and at what price?  At what level does the insurance policy cost more than what it is worth?  At what level of premium does the insurance policy become a "bill paying service" instead of a "safety net" to protect you against significant financial loss.  

CO-INSURANCE

Co-Insurance levels should be looked at under the same magnification.  A health insurance plan with an 80/20 or 80% co-insurance level is much higher in general than is a 50/50 or 50% plan.  These co-insurance levels have cut offs or Maximum Out Of Pockets to protect you against a devastating loss.  Once again, risk is really the subject at hand.

A health insurance plan (X) that has a $750 deductible and 80/20 to $5000 for example is $280 per month.  A health insurance plan (Y) that has a $250 deductible and 80/20 to $5000 is $480 per month.  Both plans have 100% coverage up to $5 million after the Maximum Out of Pocket has been met.

Your Maximum Out of Pocket for Plan (X) would be $1750 per year.

Your Maximum Out of Pocket for Plan (Y) would be $1250 per year.

Your increased "potential loss" or exposure would be $500 in any given year.

You would be paying $2400 per year to protect yourself against this "potential loss" or exposure of $500.

Please remember that these numbers are not completely accurate and are only being used for showing how certain options within a health insurance policy can impact the premium.  Weigh out the risk and "potential loss" exposure along with the premiums associated with these options.  In order to compare benefits and risk against premium cost, you should get a quote that offers several different option levels for each of the above and calculate the differences in premium.  There are many differences in insurance policies as well as insurance companies.  Once you get a quote, please feel free to call EGS Brokerage and get more detailed information on the policy you are interested in.  Only a qualified insurance agent can really answer these questions for you and fully explain differences among policies.  Never shop for health insurance on the basis of premium alone.  We want you to make informed decisions and buy what is right for your individual situation.