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Exactly How Are the Costs Of Your Health Insurance Policy Made Up?

By: Donald Saunders

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Unless you are familiar with health insurance then the costs of a health insurance plan may seem to be a little bit complex and many people are surprised that, having paid what seems like a fortune, they find themselves landed with a bill the very first time that they make a claim. So before you are hit with an enormous medical bill therefore, it is a good idea to take a minute to learn just what type of costs you can expect to incur on your health insurance plan.

The first and probably most obvious cost is the monthly premium or, in some cases, the quarterly premium or annual premium. If you are enrolled in a union or employer's group plan then you will usually be required to pay only a percentage of the premium and this will frequently be deducted from your pay check.

Most health insurance policies will also include an annual deductible which is a sum of money which you will need to pay before your insurer starts paying out on any claims. Thus, with a yearly deductible of say $1,000 you will have to meet the first $1,000 of your medical bills each year before your insurer will begin paying out. You may be familiar with the principle of paying a deductible from your experience with motor insurance policies and, if this is the case, will know that the higher the deductible on your plan the lower your premiums will be. If you have a family plan then this will frequently include multiple deductibles for the individual members covered by the policy.

The majority of plans will also include a co-payment which is a fixed amount of money which you will be required to pay towards each medical bill. Precisely how much you will be required to pay in co-payments will depend largely on the type of policy which you hold. For example, co-payments on HMO plans are often less than those on indemnity plans. In addition, the co-payment can also vary between different types of medical service and, if you are enrolled in an HMO plan, will usually increase if you are treated outside of the HMO network.

In those cases where no co-payment is required you will often find that this is replaced by co-insurance which is very similar and is a sum of money, in this case expressed as a percentage, which you will be required to pay towards each medical bill. A normal co-insurance ratio is 80/20 which means that your insurer will meet 80% of each medical bill while you pay 20%. As for co-payments, co-insurance will frequently rise if, as an HMO plan member, you are treated outside of the HMO's network. In this event you will 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 see that comparing different health insurance plans is about considerably more than simply comparing premiums. As a consequence, it is vitally important that you read the small print of any quote most carefully and that you avoid the frequent temptation to simply select the plan with the smallest monthly premium.

If you wish to keep your costs low and are a member of an HMO plan then you should attempt to stick within the HMO's network and, where you do feel the need to go outside the HMO's network, then compare actual treatment costs to what your insurer considers 'reasonable and customary' before you agree to treatment.

You can also keep your costs down on most plans by adjusting the deductible and by opting for higher or lower co-insurance. Precisely how this can be achieved is beyond the scope of this particular article but is a matter of balancing the different costs against the probability of needing to claim against the plan.

Article Source: http://depositarticles.com/

MedicalHealthInsuranceToday.com provides information on all aspects of health insurance from international travel health insurance to health insurance for pre-existing conditions

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