Just How Are the Costs Of A Health Insurance Policy Made Up?

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Unless you are familiar with health insurance then the costs of a health insurance plan could appear to be a bit complicated and many people are surprised that, having shelled out what seems like an arm and a leg, they find themselves landed with a bill the first time that they submit a claim. So before you are landed with an enormous medical bill therefore, it would be a good idea to take a moment to learn just what type of costs you can expect to incur on your health insurance plan.

The first and most obvious cost is the monthly premium or, if you so choose, the quarterly or annual premium. If you are a member of a union or employer's group insurance plan then you will usually be required to meet only a percentage of the premium and this will often be deducted from your pay check.

Most health insurance plans will also include an annual deductible which is an amount of money that you will have to pay before your insurer starts paying out on any claims. Thus, with an annual deductible of $1,000 you will have to pay the first $1,000 of any medical bills each year before your insurer will start paying out. You might be familiar with paying a deductible from your experience with car insurance policies and, if so, will know that the more the deductible on your plan the lower your premiums will be. Also, if you have a family health insurance plan then this will often include deductibles for each family member covered by the plan.

The majority of health insurance plans will also include a co-payment which is a fixed amount of money that you will be required to pay towards each medical bill. Just how much you will be required to pay in co-payments will depend to a large extent on the type of plan which you hold. For example, co-payments on HMO plans are generally lower than those on indemnity plans. Additionally, the co-payment can also vary between different types of medical service and, if you have an HMO plan, will usually rise if you seek treatment outside of the HMO network.

In cases where a co-payment is not required you will often find that this is replaced by co-insurance which is similar and is an amount of money, this time expressed as a percentage, that you will need to pay towards each medical bill. A typical co-insurance ratio is 80/20 indicating that your insurer will pay 80% of each medical bill while you pay 20%. As in the case of co-payments, co-insurance will often rise if, as a member of an HMO plan, you seek treatment outside of the HMO's network. In this event you will also find that, when a claim exceeds what the insurance company considers to be 'reasonable and customary', you could be required to meet the additional cost.

By this time you will see that comparing different health insurance plans is about far more than merely comparing plan premiums. As a result, it is critically important for you to read the small print of any health insurance quote very carefully and avoid the frequent temptation to merely pick the plan with the lowest monthly premium.

If you wish to keep costs low and are a member of an HMO plan then you should attempt to remain within the HMO's network and, when you do feel that it is necessary to go outside the HMO's network, then compare the actual cost of treatment to what your insurer considers 'reasonable and customary' before you undergo treatment.

You can also keep your costs down on most plans by raising or lowering your deductible and by opting for higher or lower co-insurance. Exactly how this can be done is beyond the scope of this short article but is a matter of balancing the different costs involved against the likelihood of having to make a claim on your plan.

MedicalHealthInsuranceToday.com provides information on all aspects of health insurance from international travel health insurance to health insurance for pre-existing conditions

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