How to Make Sense of Health Insurance


31 Comments
How to Make Sense of Health Insurance

I remember my first doctor’s visit without my mom by my side. I was a freshman in college. And the receptionist asked, “What’s your copay?” I stared at her blankly. Was that English she was speaking? I backed away from the counter and quickly called my dad, repeating the question to him. He spouted off some amount, and I skipped back to the counter feeling in-the-know. And then the receptionist slammed me with another one: “And how much is covered after the deductible?” What was she talking about? Why was she using such big words??? I left the counter again, feeling a tad sheepish, and found a corner to huddle in while I dialed up my dad once again. This time he gave me a percentage. Like a good girl, I returned to the receptionist again and announced my findings. And thus began my introduction into the wide, convoluted world of medical insurance.

Just like finances, no one ever taught Johnny and me about insurance. It was just one of those things that we had to jump headfirst into. All we knew was that we needed to have it. Once we got married and were off of our parents’ plans, we hopped onto our university’s insurance. It was the easiest, cheapest choice, but I can’t begin to tell you one single detail of the plan. Insurance details were for the boring adults of the world.

But with time, we’ve realized that the details of our insurance are kind of important. After all, thanks to our insurance when Baby Girl was born, we got a free baby. And so with the start of Johnny’s new job, we’ve been looking at every nook and cranny of his insurance and my insurance and figuring out which plans or combinations of plans will a) keep us well covered and b) save us the most money.

And so, ladies and gents, I present Joanna’s Dictionary of Insurance Terms (complete with yawn breaks):

Premium:

The premium is the amount you’re responsible for paying each month for your insurance. Some companies cover this cost at 100%, but most companies subsidize part of this cost, while the employee is expected to pay the rest. In other words, this cost could range anywhere from zero dollars to several hundred dollars per month.

Copay:

For any regular old doctor’s visit, your insurance will typically have a flat rate that you pay. It might be $15, or it could be closer to $40. And if you’re going to see a specialist, you could be paying twice those amounts. And the ER? Depending on your insurance, it could cost $50 or maybe $250. And urgent care facilities are always a higher amount, too, so be sure to know before you go. Know before you go! How’s that for a mantra?

Deductible:

The deductible is the amount you get to pay before the insurance starts covering anything. Deductibles go towards expenses like surgeries, ultrasounds, lab tests, etc. If it’s just a normal doctor’s visit, the copay should cover it. So let’s say you have a $10,000 surgery, and your deductible is $2000. If you haven’t met your deductible for the year, you’ll have to pay whatever amount it takes to reach $2000. And then that leaves $8000 left. So what happens with the $8000? Well, it depends (aka, continue reading, yo!).

As a side note, many insurance companies will cover 100% for preventive care, regardless of the deductible. So you pay $0 for preventive stuffs. Now get your behind to the doctor and get that yearly check-up/immunization you’ve been needing pronto.

[5-second yawn permitted]

Coinsurance (Percent Covered After Deductible):

If your insurance covers 100% after deductible, you’re a lucky soul. And you owe $0 on that $8000 mentioned above. However, most plans cover 50% or 60% or 80%. If your company covers 80%, you’re left with a $1600 bill.

Maximum Out-of-Pocket:

Once you’ve reached your deductible and your insurance is paying, say, 80% of everything, you also might have an amount that, if met, insurance will pay 100%. So let’s say that number is $10,000. Once you’ve met your deductible and then paid the 20% you owe up to $10,000, your insurance will pay everything else. This would probably only be used if you had a serious injury, surgery, or illness that resulted in lots of medical bills.

Maximum:

Even after the maximum out-of-pocket is met, your insurance company may have an absolute maximum they’ll pay. It could be $200,000 or maybe $2 million. Or, if you’re lucky, there is no maximum. This is only a number that would come into play with a very serious, recurring sickness that costs hundreds of thousands of dollars.

And so, considering the above factors, Johnny and I crunched the numbers and chose the insurance plan that made the most sense for us, which in our case means that Johnny will go on his new employer’s plan solo (see ya!) and Baby Girl and I will stay on my plan. And now, folks, this yawn-worthy topic can be put to rest and we can all go back to being the non-boring adults of this world.

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31 Comments

  • Reply Tabitha August 13, 2013 at 7:45 am

    Extremely informative (wish you’d been my Consumer Math teacher!) and easy to understand – I knew the terms/had a general understanding, but you just put it all out there nice and neat. And since my husband and I are dealing with insurance right now your post’s timing is excellent – thank you for planning it that way ;D

    • Reply Johnny August 28, 2013 at 1:26 am

      What, you mean coinsurance and deductibles and maximum out-of-pocket seems confusing to you?! :) Let’s just say I’m going to bookmark this page and stare at it the next time I dare call my insurance provider.

  • Reply Jordann @ My Alternate Life August 13, 2013 at 8:15 am

    Wow this is really interested for me as a Canadian. We have universal health care, so everything is free (or included as part of our taxes, however you want to look at it) so I’ve never really learned how the American system works. Thanks for the tutorial!

    • Reply Johnny August 28, 2013 at 1:27 am

      Universal health care? No no no, that’s wayyy too easy and logical for us Americans. :) Actually, it’s an interesting debate, but it’s also really boring. :)

  • Reply Cat Alford (@BudgetBlonde) August 13, 2013 at 8:15 am

    Wow! Such a timely post. I just got new health insurance, and it’s honestly pretty confusing. I asked the woman a million questions about it. Luckily, she was super helpful!

    • Reply Johnny August 28, 2013 at 1:31 am

      Good for you for asking questions! When I got my first employer insurance plan and I sat down with our HR manager, I just remember nodding my head a lot. And then I signed things and just prayed I’d never have to use it.

  • Reply Shellie August 13, 2013 at 8:55 am

    FYI- Effective Jan 1, 2014 ObamaCare makes lifetime maximum benefits illegal. (I am no expert, I’m sure there are loopholes but that’s the general idea!)

    • Reply Johnny August 28, 2013 at 1:32 am

      Thanks for the heads up, Shellie!

  • Reply Becky @ RunFunDone August 13, 2013 at 9:23 am

    At my new job, I can get a discount on the premium if I engage in healthy activities, like using a pedometer and reaching a certain number of steps per day. I’m super excited!

    • Reply Johnny August 28, 2013 at 1:33 am

      I love financial incentives for staying healthy. I know I probably shouldn’t need it (“You can be healthy… or you’ll die sooner.”) but it definitely kicks my butt into gear faster than most things.

  • Reply Carla August 13, 2013 at 10:36 am

    The maximum out of pocket always confuses me. Is it deductible plus coinsurance equals maximum, or deductible, and the coinsurance to maximum?

    • Reply Johnny August 28, 2013 at 1:38 am

      The way I understand it is the maximum amount of ALL money spent toward insurance payments (excluding premiums). So if you have a $1000 deductible, 80%/20% coinsurance, and $5000 OOP, after you hit your deductible, you’d continue to be responsible for all procedures covered at 80%/20% UNTIL you reached your $5000 OOP. And then at that point, all eligible procedures would be covered at 100%.

      Hope that makes sense instead of just confusing you more. :)

  • Reply sarah @makingitmyhome.blogspot.com August 13, 2013 at 10:58 am

    YES!!!!!!!!!!!!!!!!!!!!!!!! GREAT POST!!!! I am nearing my 30’s and I still dont quite understand this insurance stuff!!! They should have a class in high school where they teach you what these terms are, and provide the students with “real world” scenarios about how much things cost versus how much you actually take home in a pay check.
    career calling for you guys…..

  • Reply Alysia @ Slim Sanity August 13, 2013 at 1:25 pm

    This is very helpful and informative! I’m quite sure that if I go back through my insurance details, I’ll find out why I don’t have anything covered (crappy student insurance)

    • Reply Johnny August 28, 2013 at 1:43 am

      I remember our student insurance being pretty awful, too. Lucky for us, we stayed mostly healthy during college, minus a brief stint of mono (which I’m pretty sure Joanna gave me, but she denies it).

  • Reply Tara @ Streets Ahead Living August 13, 2013 at 1:59 pm

    I am lucky in my career in that I work for a private school that is part of a union that is an amalgamation of different careers. As such, the union bargains on our behalf to keep costs down. I pay 6.3% of my pre-tax earnings on my health insurance which is fairly low for the awesome benefits we have (I have dental coverage, low copays, and great prescription rates). My fiancee is finally going to be eligible for insurance at his job (had to wait 6 months) but I have a sneaking suspicion that going over the numbers like you all did, it will be cheaper for him to be on my insurance (with the quality of service provided) versus going on his own.

    • Reply Johnny August 28, 2013 at 1:48 am

      It’s such a nice perk to have quality and affordable health insurance. Hopefully your union/employer doesn’t prevent spouses from joining the plan if they have access to their own employer’s plan. A lot of companies have been implementing that policy with the impending start of ACA (aka Obamacare).

      • Reply Tara @ Streets Ahead Living August 28, 2013 at 9:52 am

        Luckily, those changes are not affecting us. In addition, I found out great news: my insurance is the same price if it’s just me or if I’m married and have 10 kids. Since my premium won’t got up when I get married, he’s definitely joining my health insurance plan. I know that’s rare to have so it’s definitely an impetus to stay at my current job, at least for the time being. The sad thing is though that I rarely take advantage of my coverage, except to go to my annual well-woman checkup!

        I will say one way they keep down costs for my insurance… you must use mail-order pharmacy or a special “mail order through Walgreens” option if you have a monthly prescription. They won’t pay for it otherwise.

        • Reply Johnny August 29, 2013 at 2:05 am

          Woah, that’s really rare! And awesome! Bummer on the mail-order drugs, but fingers crossed, you won’t be needing any meds anyway. Overall though, awesome awesome news.

  • Reply Gaynor August 13, 2013 at 2:59 pm

    Wow! Thank goodness for the NHS in Britain, this seems so convoluted and unfair on those who can’t afford it.

  • Reply debty swan August 13, 2013 at 6:57 pm

    Wow, this was so helpful! Everything about insurance confuses me, including the claim denial and appeal process. Thanks for the great info!

  • Reply Rob August 13, 2013 at 8:20 pm

    I really can’t comment on how insurance works in the U.S. but here is how things work for our family here in Canada (and it’s not exactly as Jordann has commented above). Here’s how co-insurance coverage works for my wife and myself (and covered our kids before they reached adulthood and then had to set up their own insurance coverage plans):

    For medical expenses, we do have extensive government coverage (which varies by province) but here in Ontario there still are some medical expenses not gov’t covered (egs., certain drug costs, semi-private / private hospital stays, certain medical procedures). To pay for these non-gov’t covered expenses, our employer insurance plans for employees kick in. Each of them is set up for family coverage which means that my medical costs would be 80% covered by my insurance plan, with the remaining 20% being covered by my wife’s insurance plan (using co-insurance). This way even the deductibles get covered and I pay zip! The same holds true for my wife’s expenses (her insurance pays 80% with mine paying the remaining 20%).

    The same 80/20 co-insurance, as outlined above, also applies for our dental expenses, which are not gov’t insured, at least not for us here in Ontario.

    When our kids were younger and living with us, their medical / dental expenses (except for braces – lol) were also fully covered by both of our plans via co-insurance. The premiums paid for our employer insurance family coverage plans were paid for partly by our employers and partly by ourselves through employee payroll deduction.

    After we retired, our company insurance plans still continued in effect except that then our share of the yearly premiums reduced (in my wife’s case) or disappeared altogether (in my case)

    So, yep, insurance stuff can be deadly boring but oh so necessary to get on top of.
    I won’t even get started on required life insurance coverage (and all it’s various types) !

    Who’s idea was it to blog about this (yawn) boring topic anyway, eh? :-)

  • Reply Kay August 14, 2013 at 12:53 pm

    May I ask (politely) how you work part-time from home and can afford health insurance for you and a baby?

    • Reply Johnny August 28, 2013 at 1:52 am

      Joanna is fortunate to have a full-time job. And to make a fortunate situation more fortunate, it’s for a non-profit, so they are very fair in their health benefits. The premium is still a hefty amount out of her monthly paycheck, but it’s well worth the security, especially while I was unemployed and didn’t have access to anything but COBRA.

  • Reply j.mill August 14, 2013 at 3:18 pm

    They need to teach this stuff in school! I would have swapped my history class for this!

  • Reply Nicki August 19, 2013 at 8:36 am

    Great stuff! A few other things to consider: does your employer offer you a buyout? If you are married and can be carried on a spouse’s insurance, many employers – mostly public enterprises, not private ones – offer you a buy out, money for not taking their insurance.

    Another thing is for parents, I know this is hard to imagine, to allow their child/children to go to that college physical alone, if that child/children is 18. Generally, if a person is not 18, you cannot go without parental permission for treatment. This allows a child to get use to talking to a practitioner without Mom or Dad there.

    Make sure your college student takes an insurance card to college. The logistical mess of calling and getting the insurance applied afterwards is just a pain in the butt.

    • Reply Johnny August 28, 2013 at 1:53 am

      I’ve never thought about seeing if my (or Joanna’s) employer offers a buyout. We will definitely check into that.

      Thanks for the tips, Nicki!

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  • Reply Bee July 2, 2015 at 6:39 pm

    I work in the medical field and this helped my understand more than the person who had trained me

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