Out-of-pocket medical costs are a reality – regardless of changes related to health care reform – and can add up quickly. Some can be very much unexpected, so it is important to consider where they arise:
Deductible: The amount owed for covered health care services before your health insurance or plan begins to pay. For example, if a plan deductible is $1,000, the plan won’t pay anything until you pay $1,000 toward covered health care services subject to the deductible. The deductible may not apply to all services.*
Coinsurance: The percentage you pay toward each covered health care service. The coinsurance is paid on top of any deductible. For example, let’s say your company offers an 80/20 health insurance plan and the allowed amount for an office visit is $100. Once you’ve met your deductible, your coinsurance payment of 20 percent would be $20. The health insurance or plan pays the rest of the allowed amount.*
Copay: A fixed amount – for example, $15 – you pay for a covered health care service, usually when you receive the service. The amount may vary by the type of covered health care service.*
Non-medical costs: When faced with a serious accident or illness, there are various non-medical costs associated with a hospital stay or recovery time, including child care, transportation and reduced take-home pay due to missing work. These expenses can add up quickly, contributing to the overall out-of-pocket cost of being sick or injured.
Limits or exclusions: Pay attention to services not included in your plan, as well as any limitations or exclusions. Due to health care reform, plans will no longer have lifetime or dollar limits, but there may be limits related to other items, such as the number of refills for certain drugs, the number of visits to certain specialists or the number of days covered for certain benefits. These limits or exclusions could mean unexpected out-of-pocket costs.
Out-of-pocket limit: Out-of-pocket costs are different than out-of-pocket limits. Out-of-pocket limits are established by the IRS and for 2014 they are $6,350 for individual coverage and $12,700 for family coverage. This means you will pay coinsurance – in a variety of ways as determined by your health plan – up to your out-of-pocket limit. These limits apply only to covered expenses, so if you or a family member incurs non-covered expenses, they will not count toward your out-of-pocket limit. This adds to your potential unexpected costs.
*Note: Definitions and examples were adapted from healthcare.gov/glossary.