No, not That Talk. I mean The Talk about health insurance, why it is so important to have, and what it will cost to pay for and use it.
I came upon an article posted on CNBC by Abigail Summerville titled “The 5 health-care terms every millennial should know.” As someone who has young adults entering the job market, I thought her summary useful and worth passing on.
She includes five key definitions provided by Katelyn Gleason, CEO of Eligible, a developer of health-care Application Programming Interfaces (APIs). I have edited them a bit and added a sixth to her list.
- Premium: This is the amount of money you pay for the insurance policy. Not unlike other types of insurance, the premium only covers the policy and does not necessarily cover the costs of services you use.
- Out-of-pocket costs: These are the costs for medical care that are not reimbursed by insurance. They include co-pays, deductibles, and co-insurance for covered services, plus all costs for services that aren’t covered. Typically, there is an annual cap on out of pocket expenses. Gleason provided the following example. Say you develop a serious medical issue and the costs add up to $100,000 for that year. If your out-of-pocket maximum is $10,000, then after you have paid $10,000 (generally through co-pays, deductibles and co-insurance) your insurer is responsible for the other $90,000.
- Co-pay: A co-pay is a predetermined amount of money you would pay out of your pocket when you receive medical care. However, the co-pay can vary depending on what type of care you need or the type of doctor you visit. For example, as Gleason points out, there is usually a smaller co-pay for visiting your regular doctor, and a higher co-pay for an emergency room visit. Know too, however, that some services have no co-pays. Rather, 100% of the cost is paid by you and applied to the policy’s deductible or co-insurance.
- Deductible: This is a specified amount of money you must pay before an insurance company will begin to pay for certain types of claims. For example, a routine visit to your regular doctor may be covered by a co-pay, but any tests which may be ordered may be charged to you at 100% of the network cost until your deductible is met. For example, if you have a $500 deductible, and the tests cost $100, you would pay the co-pay plus the $100. Once you have reached the $500 deductible level, then any additional costs would likely be applied to co-insurance.
- Co-insurance: Some plans include a provision where the insured also pays a share of the payment above and beyond the deductible. For example, say your co-insurance is 20 percent and you receive a medical bill of $1,000. After you have paid your deductible, you would pay $200 and your insurer would pay $800. You typically pay co-insurance after meeting your annual deductible and it is capped by your out of pocket maximum.
- In network / out of network providers: The difference if often a significant source of confusion. Most plans have a defined ‘network’ of healthcare providers with which the plan has contracted to provide services at a defined and often significantly discounted rate. Providers who have contractually agreed would be ‘in-network’ for the plan. If the providers do not they are considered ‘out of network’ and more than likely you will have to pay the full cost of the service. Thus, it is very important to verify if the provider is in-network or out of network before receiving services. This can be a major source of surprise when a bill for services comes.
Here at A. Alliance we know all too well that health related debts are the number one source of bad debt, and often this is the result of patients not fully knowing or understanding the cost of their insurance or the services their policies will pay for. Helping our young adults understand the ins and outs of health insurance can prevent financial surprises which often impact debt and even credit ratings.
A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners. Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 12 years.