Do You Know How the Costs Of Your Medical Insurance Plan Are Made Up?

Unless you are familiar with health insurance then the costs involved in a medical insurance plan may appear to be a little complex and many people are surprised that, having shelled out what seems like an arm and a leg, they find themselves landed with a bill the very first time that they make a claim. So before you are landed with a substantial medical bill therefore, it might be a good idea to take a moment to learn just what goes to make up the cost of individual health insurance.

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

Most medical insurance plans will also include an annual deductible which is an amount of money that you will be required to pay before the insurance company begins to pay out on any claims. So, with a yearly deductible of $1,000 you will need to meet the first $1,000 of any medical bills each year before your insurer will begin paying out. You might be familiar with paying a deductible from your experience with car insurance policies and, if so, will know that the higher the deductible on your policy the lower your premiums will be. In addition, if you have a family medical insurance policy then this will often include deductibles for each family member covered under the policy.

Most medical insurance policies will also include a co-payment which is a fixed amount of money that you will be required to pay towards every medical bill. Exactly how much you will need to pay in co-payments will depend to a large extent on the type of policy you have. For example, co-payments on HMO plans are often lower than those on indemnity plans. Additionally, 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 cases where a co-payment is not required you will usually find that this is replaced by co-insurance which is very similar and is an amount of money, this time expressed as a percentage, that you will again be required to pay towards each medical bill. A typical co-insurance ratio is 80/20 which means that the insurance company will pay 80% of each medical bill while you pay 20%. As in the case of co-payments, co-insurance will frequently rise if, as a member of an HMO plan, you are treated outside of the HMO’s network. In this case you will also find that, where a claim exceeds what the insurance company considers to be 'reasonable and customary', you could be required to meet the additional cost.

By this time you will realize that comparing medical insurance plans is about considerably more than just comparing premiums. As a consequence, it is critically important for you to read the details of any medical insurance quote very carefully and avoid the common temptation to merely pick the plan which has the lowest monthly premium.

If you wish to keep your costs low and are in an HMO plan then you should try to stick within the HMO’s network and, when you do feel that it is necessary to go outside of the HMO's network, then compare the actual cost of treatment to what the insurance company considers 'reasonable and customary' before you agree to treatment.

It is also possible to keep your costs under control on many plans by adjusting the deductible and by selecting higher or lower co-insurance. Just how this can be done is beyond the scope of this brief article but is a question of balancing the various different costs against the probability of having to claim on your policy.

This may seem somethat complicated but an understanding of the different costs that make up your overall expenditure is extremely important when it comes to getting the best deal and finding a suitable cheap medical insurance plan.