Exactly How Are the Costs Of A Health Insurance Plan Made Up? - By: Don Saunders

If you are not familiar with health insurance then the costs involved in a health insurance plan may seem to be a bit complex and many people are surprised that, having spent what seems like a fortune, they find themselves faced with a bill the first time that they submit a claim. Before you are landed with a large medical bill therefore, it might be a good idea to take a moment to learn just what type of costs you should expect to incur on your health insurance plan.

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

The majority of health insurance plans will also include an annual deductible which is a sum of money that you will need to pay before the insurance company starts to pay out on any claims. In other words, with a yearly deductible of say $1,000 you will need to meet the first $1,000 of any medical bills each year before the insurance company will begin paying out. You might be familiar with paying a deductible from your experience with motor insurance and, if so, will know that the higher the deductible on your plan the lower your premiums will be. If you have a family health insurance plan then this will often include deductibles for each family member covered by the plan.

Some health insurance policies will also include a co-payment which is a fixed sum of money that you will be required to pay towards each medical bill. Exactly how much you will be required to pay in co-payments will depend largely on the type of plan which you hold. For example, co-payments on HMO plans are often less than those on indemnity plans. In addition, the co-payment will also vary between different forms of medical service and, if you have an HMO plan, will generally rise if you seek treatment outside of the HMO network.

In those cases where no co-payment is required you will often find that this is replaced by co-insurance which is similar and is a sum of money, this time expressed as a percentage, that you will have to pay towards each medical bill. A typical co-insurance ratio is 80/20 meaning that the insurance company will meet 80% of each medical bill while you pay 20%. As with co-payments, co-insurance will frequently increase if, as an HMO plan holder, you seek treatment outside of the HMO's network. In this case you may also find that, when a claim exceeds what is considered by the insurance company to be 'reasonable and customary', you might be required to meet the additional cost.

By now you will realize that comparing different health insurance plans is about considerably more than merely comparing plan premiums. As a consequence, it is critically important for you to read the small print of any health insurance quote most carefully and avoid the frequent temptation to merely select the plan which has the lowest monthly premium.

If you want to keep costs low and are a member of an HMO plan then you should attempt to stick inside the HMO's network and, if you do feel the need to go outside the HMO's network, then compare actual treatment costs to what the insurance company considers 'reasonable and customary' before undergoing treatment.

You can also keep your costs under control on most plans by raising or lowering the 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 needing to make a claim against the plan.

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