Insuance

Insuance

Insurance is s a contract in which an individual or entity pays an insurance company in exchange for financial protection or reimbursement of losses resulting from covered events. Three components of any type of insurance are crucial: premium, policy limit, and deductible.
Premium
A policy’s premium is its price, typically expressed as a monthly cost. The premium is determined by the insurer based on your or your business’s risk profile, which may include creditworthiness.
Policy Limit
The policy limit is the maximum amount that an insurer will pay under a policy for a covered loss. Maximums may be set per period (e.g., annual or policy term), per loss or injury, or over the life of the policy, also known as the lifetime maximum.
Deductible
The deductible is a specific amount that the policyholder must pay out of pocket before the insurer pays a claim. Deductibles serve as deterrents to large volumes of small and insignificant claims.

Copays, Coinsurance and Deductibles

Copay

  • -is a set amount you pay for prescriptions, doctor visits, and other types of care.

Coinsurance

  • – is the portion of costs you pay after you’ve met your deductible.

Deductible

  • – is the amount of money you have to pay for your health care each year before your plan starts to pay for covered services. For example, if your deductible is $3,000, you have to pay that amount before your insurance will cover everything.

These are health care costs that your insurance won’t pay for, like if you haven’t met your plan’s deductible yet. The out-of-pocket maximum is the most money you will have to pay on your own in a year.

When you reach your out-of-pocket maximum, your health insurance plan pays for all covered services for the rest of the year.

Similar to deductibles, there may be two out-of-pocket limits: an individual and a family limit. The highest permissible out-of-pocket maximum under the Affordable Care Act is $8,550 for individual coverage and $17,100 for family coverage.

How it all works together

1. You pay a monthly premium to have health insurance

 

 2. When you go to the doctor or the hospital, you pay either full cost for the services or copays as outlined in your policy.

 

3. Once the total amount you pay for services, not including copays, adds up to your deductible amount in a year, your insurer starts paying a more significant chunk of your medical bills, commonly 80%. The remaining percentage that you pay is called coinsurance.

 

4. You’ll continue to pay copays or coinsurance until you’ve reached the out-of-pocket maximum for your policy. At that time, your insurer will start paying 100% of your medical bills until the policy year ends or you switch insurance plans.
In network
This is the group of doctors and providers who agree to accept your health insurance. Health insurers negotiate lower rates for care with the doctors, hospitals and clinics in their networks. So when you go in-network, your bills will typically be cheaper, and the costs will count toward your deductible and out-of-pocket maximum.
Out of network
A provider your insurance plan hasn't negotiated a discounted rate with is considered out of network. If you get care from an out-of-network provider, you may have to pay the entire bill yourself, or just a portion, as indicated in your insurance policy summary.