common term you hear in association with health care is “out-of-pocket cost.” What does that term really mean and how does it impact you and your coverage?
The term “out-of-pocket cost” means the amount of money the insured party has to put out to a medical provider or supplier without any help from the insurance company or government. In some cases, the money may be reimbursed. However, in the case of Medical Insurance, these costs are not recoverable.
Here are seven different ways that an insurance company will pass along costs to the insured party.
- Insurance premiums – One of the most obvious costs the insured party must pay is insurance premiums. This is usually a monthly payment the person pays to get and keep coverage.
- Deductibles – One way an insurance company passes these costs along is in the form of a deductible. This is a set amount that a patient must pay first before the insurance company will start paying. This amount is usually a certain amount due each year. The amount resets each year.
- Co-pays – When you visit a doctor or get a prescription, you may have to pay a co-payment at the point of delivery. That is your portion of the bill for that treatment or medicine. That is another form of out-of-pocket cost.
- Co-insurance – Some insurance plans require the insured party to cover a certain percentage of costs for treatments. A typical percentage split is 80/20. That means the insurance company pays 80%, while the insured party pays 20%.
- Coverage limits – Coverage limits put a maximum threshold on the amount the insurance company will cover for certain medical procedures or supplies. Any amount over that coverage limit is another expense that the insured party must pay.
- Non-covered expenses – Some insurance policies have lists of items or services the plan will not cover. A common one not covered is plastic surgery.
- Out of network providers – If you are part of an HMO or a PPO, if you choose to go to a provider who is not in the approved network, the non-covered expenses for that choice also come out-of-pocket.
When looking at insurance policies it is important to consider the out-of-pocket cost that you will incur. It should be a major factor in your choice of policy. Don’t be fooled by a low monthly premium. The total costs should be the deciding item on any policy.