Comparing Insurance Plans – It’s Complicated
Run a couple of simple situations in your mind – one in which you have to go to the emergency room for something relatively simple (let’s say, a sprain in the ankle), at a cost of $1,000. Now imagine another situation, where something terrible happens (getting hit by a bus, let’s say), and you end up needing $50,000 of medical care.
You may find something surprising – the plan where your total cost would be lowest would be your company’s high deductible plan. A deductible is the amount of money you have to spend out of your own pocket on medical care before the health insurance kicks in.
However, that might not always be the case, depending on the specific medical care that you need. But it is worth digging in to understand why you would choose any other plan over your company’s plan.
However, let’s not focus on deductibles for now and shift our focus to the out-of-pocket maximum, which is a term for the total amount your insurance provider will need you to spend on medical care in one year. If you spend more than the out-of-pocket maximum, your health insurance plan will cover the remaining cost for you.
When your spending is higher than your deductible but below your out-of-pocket maximum limit, you’ll still be required to pay some of the costs such as the cost of seeing a doctor or picking up a prescription. This can be a flat $25 or $50 to go into a clinic. This is known as a copayment. It can be calculated as a percentage of the cost of a visit, in which case it’s called coinsurance.
What Does A Deductible Do?
Ideally, your health insurance company would also do a similar analysis for you. It’s typically buried somewhere in the middle of a document that you get from HR or the insurance company. The section of the document is called the Summary of Benefits and Coverage. Ensure that you read the document completely, so you are aware of the Summary of Benefits and Coverage and understand what the plan covers and what it does not. Once you understand that, you will be able to decide whether you should opt-in for your company’s plan or choose a different plan.
