Health Insurance

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Health Insurance Plans

Health insurance is easier to understand when you know what the key words mean and what structures to look for.


Some plans have copayments only, some plans have copayments and an annual deductible, some have copayments, deductible, and coinsurance. Some plans have a deductible only, which is the simplest of all.

When there are copays (copayments) only, all you pay is a fixed amount for each covered medical service and the health insurance plan pays for the rest. Different medical services will have copays of different amounts, e.g., a doctor office visit may be $30 or so, and an outpatient surgery may be $200 or so. There is nothing else for you to pay for that expense, except the specified copay.


When there is a deductible, there is an annual amount that you pay 100% before the plan pays anything. If there are no copays, then you pay all covered expenses for the year until you have paid the deductible amount yourself. Then the health insurance plan starts to pay. The deductible may be per calendar year, January 1 to December 31. Calendar year deductible is the most common. Unless your coverage starts on January 1, the first deductible period will be less than one year. The deductible in that first period may or may not be pro-rated for the number of months of the initial period.

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Alternatively, the deductible year may be based on when you first enrolled in the plan. That may be called a "policy year" deductible. Your deductible year, or benefit year, starts when you were first covered and then goes for a full 12 months. Then the deductible year starts again on the annual anniversary of when your health insurance plan started.

If you have medical expenses, then after you have paid the deductible yourself that year, health insurance plan will pay a specified percentage of covered expenses. The percentage may be 100%. That is nice and simple. However, the specified percentage paid by the plan may be 90%, 80%, 70%, 60%, or 50% or somewhere in between. Plans typically never pay less than 50%. You pay the balance of the expenses not covered by the plan. Because you are paying some and the plan is paying some, the payment arrangement is called "coinsurance".

Stop Loss

It is important to find out at what amount of annual covered expenses a plan starts to pay 100%. That amount of annual expenses is often called the "stop loss". If you do not know the stop loss figure as well as the coinsurance percentage, you do not know how much in medical expenses you may have to pay by yourself. You may find that many brochures and plan descriptions for health insurance plan do not plainly state the stop loss figure, but you need to know what it is or you do not know what you are buying.

Deductible and Copays in one Plan

If there are copays and a deductible in the same plan, then usually each refers to specific, different medical services. Take for example, a $30 physician office visit copay and a $1,000 deductible plus coinsurance in the same plan. Usually, but not always, the $1,000 deductible and coinsurance would not apply to physician office visits. You go to the doctor, pay the $30 copay, and the plan pays the rest. The same is true for prescription copays where there is also a deductible with coinsurance in the same plan. You pay the appropriate copay for generic, or brand name, or non-formulary health insurance plan, and your health insurance plan pays the rest for that prescription.

Typically, the deductible and coinsurance do not apply to covered prescription costs when there are prescription copays. However, some plans have a special, separate, annual prescription deductible, i.e., there are two deductibles, one for prescriptions and a general annual deductible for all other medical expenses. After you have paid the separate prescription deductible, you then only have to pay the copay, and the plan pays the rest of that prescription. However, in some plans you may have to pay coinsurance for prescriptions, instead of copays, after you have paid the deductible.

There are other possible combinations also. Some plans may have copays for most medical services, no deductible, but coinsurance for inpatient hospital up to a certain stop loss figure. Combinations in health insurance plan can vary significantly and change as insurers change plan designs so it pays to examine each plan structure carefully.

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