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Healthcare 101: Back to Basics | CA Benefits Consultants

Getting sick can be expensive.  Even minor illnesses and injuries can be very costly to diagnose and treat.  Health care coverage helps you get the care you need and protects you and your family financially if you get sick or injured.

We’re breaking down the health insurance basics.  Because, when you understand it, you’re more likely to get preventive care, make better health decisions and even reduce your costs.

55% of people can’t answer basic health insurance questions and younger generations struggle with understanding the fundamentals of insurance even more.  69% of millennials and 64% of Gen Zers admitted they’ve opted not to seek care due to uncertainty about their health insurance.

Put simply, health insurance is a way to pay for your health care.  Your health insurance protects you from paying the full costs of medical services when you’re injured or sick.  And it works the same way your car or home insurance works: you or your employer choose a plan and agree to pay a certain rate, or premium, each month.  In return, your health insurer agrees to pay a portion of your covered medical costs.

How Health Insurance Payments Work

Your premium, or how much you pay for your health insurance each month, covers some or all the medical care you receive – everything from prescription drugs to doctors’ visits.  Most people choose a health insurance plan based on the benefits and medical services the plan covers, as well as on monthly cost.  But there are other factors to consider as well, like what you will be required to pay when you see a doctor or a health care facility.

These out-of-pocket payments are important to understand and know the differences between them:

  • Deductible – A deductible is the amount you pay out of pocket on healthcare costs before your insurance company starts to contribute to your healthcare costs for the year.  Generally, a plan with a lower deductible will have a higher monthly premium than a plan with a higher deductible.
  • Co-pay – A co-pay is a set fee you pay for a doctor visit.  For example, if your policy lists a co-payment of $20 for a doctor visit, you pay that amount each time you see the doctor.  Keep in mind that the co-pay will differ for different services.  What you pay for a trip to the emergency room will probably not be the same as a co-pay for a visit to your primary care physician.
  • Co-Insurance – Co-insurance is the amount you pay for covered health care after you meet your deductible. This amount is a percentage of the total cost of care – for example, if your co-insurance is 20%, your insurance covers the other 80%.  Co-insurance levels vary by plan, as do deductibles.
  • Out-of-Pocket Maximum – An out-of-pocket maximum is a limit on the amount of money you have to pay for covered services in a plan year.  After you spend this amount on your deductible, co-payments and co-insurance, your health plan pays 100% of the costs of covered benefits.

Knowing how your insurance and healthcare costs are structured is an important part of your personal finances.  When you choose a plan, look at your typical healthcare needs and costs so you can make the best decision for your health, and your wallet.