Financial Literacy for Everyone

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Selecting the health care plan that is best for you requires factoring in your budget and your needs. Plans vary based on their monthly premium payments. Your first step in selecting a plan is to determine your monthly budget for paying a health insurance premium. However, premiums aren't the only difference to take into account when you're choosing a health insurance plan.

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The cost of your health care visits and procedures consists of the deductible, copay and coinsurance.

Deductible
A deductible is a fixed amount that you pay each year before your health insurance begins to pay for your health care expenses. Your plan will cover a portion of your health care bills after you've paid your deductible. A plan with a high deductible will require less expensive monthly payments, but you'll pay more up front when you need medical treatment.

Copay and Coinsurance
You and your health insurance company both pay portions of your medical services costs, in an arrangement known as cost sharing. Your plan's cost-sharing agreement will determine the amount you pay at the time you use health services, including your doctor visits, laboratory fees and any prescription purchases. Communicate with your insurance company after carefully reviewing your bills and benefits to ensure you understand the responsibility of costs and raise any questions you may have.

There are two ways health insurers set up cost sharing: as a flat rate copay or as a percentage called coinsurance.

  • Copay – In general, your out-of-pocket expenses will be lower with plans using only copays, and the copays are easier to understand as you track your bills and balances. For example, if you receive a lab test during your doctor's visit and your copays are $25 for visits and $25 for tests, you'll pay $50 total.
  • Coinsurance – With coinsurance, that same scenario becomes a little less clear. Your plan has 20 percent coinsurance for each service, so you'll pay 20 percent of the doctor's fee and 20 percent of all laboratory charges. Unlike the copay scenario, you won't know what your final cost is until services have been provided and you get a bill in the mail.

Some health plans use a combination of copays and coinsurance — for example, they use copays until the deductible is met and then coinsurance until you meet your yearly out-of-pocket maximum, which is the most you can pay for health services in a given year.

Your Health Care Provider
Each insurance policy has its own network of health care providers who accept payment from your insurer at a discounted rate. It may be the case that you don't live near any doctors who are in-network or included in your plan's network. Review your policy's network and consider how many providers are covered by it and where they are located — to avoid paying extra for going out of network. If you want to stay with your current doctor, then you can call him or her to ask in which health insurance networks they're included. If you don't have a preferred doctor, you'll probably want a plan with a large network so you'll have more options to choose from. Learn more about health insurance plans at healthcare.gov.

Communicating With Your Insurance Company
Understanding your insurance coverage can be confusing. Review your bills carefully before paying. If you have questions, call your insurer for help.

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