Choosing the right health insurance plan is complicated. This blog breaks down the total costs of health insurance to empower you to choose the plan that works for you and your family.
What is a deductible?
A deductible is the amount you will pay, besides the monthly premium, before your insurance company will begin contributing to your medical services. Depending on the plan you select, you will have a separate deductible, coinsurance, and out of pocket maximum. Examples of services that are typically subject to your deductible are surgeries, lab testing, imaging services, and emergency room visits. Generally, the higher your deducible is, the lower your monthly premium will be.
What is an embedded deductible?
If a plan has an embedded deductible, then each family member on the plan is subject to the individual deductible only. This means there are two ways your coverage will kick in:
- If an individual family member meets the individual deductible limit, any services that are subject to that deductible are covered for that individual.
- If the group collectively meets the family deductible, any services that are subject to the deductible are covered for all family members going forward.
Simply put, if an individual plan member has high enough medical costs, the plan will start covering their expenses even before the overall family deductible has been met. Some plans also have additional embedded deductibles for expenses like prescription drugs or therapy.
What is a non-embedded deductible?
If a plan has a non-embedded deductible, then the individual deductible does not apply. Services that are subject to the deductible will only be covered once the group has collectively met the deductible.
What is a copay?
Defined cost for specific services such as primary care office visits, specialist office visits, and generic prescriptions and some tiered prescriptions. Copays are separate from and do not go towards your deductible, but they do apply to your out of pocket maximum.
What is coinsurance?
Coinsurance is a set percentage for services paid after the deductible has been met, but before the out of pocket maximum has been met. After you’ve met the deductible, you will pay a percentage of your service and your insurance company pays the remaining percentage towards medical services up until you meet your out of pocket maximum.
For example, you are enrolled in your employer’s health insurance plan that has am individual deductible of $2,000, an out of pocket maximum of $4,000 and 20% coinsurance. If you needed to have surgery, like delivering a baby or shoulder repair, the cost of that might be $17,000 if you didn’t have insurance. But because you enrolled during open enrollment, you would pay:
$2,000 (your deductible)
+ $3,000 (20% of the remaining $15,000)
– $1,000 (because your out of pocket maximum limits your total to $4,000)
Because your plan has an out of pocket limit of $4,000, you would only pay $2,000 in coinsurance, and then nothing until your deductible reset at the beginning of the next plan or calendar year.
What is an out-of-pocket limit?
The out-of-pocket limit is the maximum amount you would pay in a year for covered, in-network services. Services that are subject to your deductible, coinsurance and/or copays reduce the amount you owe towards your out-of-pocket limit.
What is embedded out-of-pocket limit?
If a plan has an embedded out-of-pocket limit (OOPL), then each family member on the plan is subject to the individual OOPL only. Once a family member meets the individual OOPL, any covered services will be 100% covered for that member. If the group collectively meets the family OOPL, any covered services used by any family member will be 100% covered going forward.
What is non-embedded out-of-pocket limit?
If a plan has a non-embedded OOPL, then the individual OOPL does not apply. Covered services will only be 100% covered once the group has collectively met the family OOPL.
It is possible to have two out-of-pocket limits, though not as common. In this case the plan may have a smaller out-of-pocket limit that does NOT include prescription drug cost sharing or other cost sharing. It would then have a higher maximum out-of-pocket (names of limits are subject to change based on carrier) that would include the excluded cost sharing. If you meet the smaller out-of-pocket limit, your medical expenses would be covered 100% for the remainder of the benefit year. However, the prescription and other excluded cost sharing would not be covered at 100% until you meet the higher maximum out-of-pocket limit.
Looking for more open enrollment employee resources? Download our Open Enrollment Employee Resource Guide. It shares easy-to-understand insurance guidance that will help employees ace open enrollment year.