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The term “cost-sharing” refers to how health plan costs are shared between employers and employees. It’s important to understand that the cost-sharing structure can have a big impact on the ultimate cost to you, the employer. Generally, costs are shared in two main ways:
The general rule is that the greater the cost-sharing at the time of service, the lower the premiums. With this in mind, the decisions you’ll have to make include:
Below we provide more information about premium contributions as well as the different types of cost-sharing at the time of service: copayments, co-insurance, deductibles, and caps on out-of-pocket expenses. For a review of which types of health plans use which types of cost-sharing methods, see “Plan Characteristics and Types” in the tool box.Premium ContributionsA health insurance premium is the total amount that must be paid in advance in order obtain coverage for a particular level of services. Usually health insurance premiums are billed and paid on a monthly basis. Employers typically require employees to share the cost of the plan premium, usually through employee contributions right from their paychecks. Keep in mind, however, that most insurers require the employer to cover at least half of the premium cost for employees. Employers are free to require employees to cover some or all of the premium cost for dependents, such as a spouse or children. CopaymentsA copayment or “copay” as it is sometimes called, is a flat fee that the patient pays at the time of service. After the patient pays the fee, the plan usually pays 100 percent of the balance on eligible services. Eligible services are those services that the plan includes in its coverage. The fee usually ranges between $10 and $40. Copayments are common in HMO products and are often characteristic of PPO plans as well. Under HMOs, these services almost always require a copayment:
Co-insuranceIn many health plans, patients must pay a portion of the services they receive. This payment is called “co-insurance” and is usually a small percentage of the service cost after the plan pays benefits. If the plan pays 70 percent of the cost, the patient pays 30 percent of the cost. If the plan pays 90 percent, the patient pays 10 percent, and so forth. Co-insurance is common for PPO products and less common in HMOs. Let’s say the patient has a PPO plan and a neighbor recommends a new doctor. The patient checks the provider directory and sees that the doctor is listed as part of the PPO’s network. The patient goes for an office visit and because it’s in the network, the negotiated rate is $100. The plan pays 90 percent of eligible charges and the patient pays 10 percent, as shown here:
Keep in mind that the total costs vary depending on whether the patient receives an in-network or out-of-network service. If it’s a network service, then the percentage the patient and the plan pay is based on a negotiated rate, which can be much less than the patient would pay without insurance. If it’s an out-of-network service, the percentage the plan pays is based on the usual, customary and reasonable (UCR) rate, also known as the “reasonable and customary” (R&C) rate or “allowable” charge. UCR is the standard charge in that area for that service. The patient has to pay 100 percent of any charges that exceed UCR. So, let’s say the patient has a PPO and a neighbor recommends a new doctor that’s not listed in the provider directory. Because the doctor is out of network, the plan pays its share of the out-of-network co-insurance: 70 percent of the usual, customary and reasonable charge. The patient’s share is 30 percent of the UCR amount, plus 100 percent of any amount over UCR.
These examples show that patients save money in two ways when they stay inside the network: The total charge is less because of health plan negotiations with network providers, and the patient’s percentage share of cost is also lower. DeductiblesThe deductible is the amount a patient pays before the plan pays anything. Deductibles generally apply per person per calendar year. Under PPOs with co-insurance, deductibles usually apply to all services, including laboratory tests, hospital stays and doctor’s office visits. Some popular plans, however, waive the deductible for office visits. Then for most other covered medical expenses for the rest of the year, the plan pays its share and patients pay their share. Most HMOs don’t have general deductibles, but may have a service-specific deductible for inpatient hospitalization or for brand-name prescription drugs. Generally speaking, the higher the deductible, the lower the premium. Some plans with particularly high deductibles—say, $2,000 and up—are known as “high-deductible” plans. While these plans may have significantly lower premiums, participants are exposed to high out-of-pocket costs. In the tool box, see “How Are Deductibles Applied?” for an illustration of how an employee may see deductibles applied chronologically throughout the year.Out-of-Pocket MaximumOnce out-of-pocket expenses per individual reach a defined limit in a single calendar year, the plan will pay 100 percent of eligible charges for the rest of the calendar year. The definition of out-of-pocket maximum will differ depending on your insurance carrier. Some carriers exclude specific costs (for example, fertility treatments or prescription drugs) or increase the maximum for care provided by out-of-network providers. Out-of-pocket cap levels typically are in the range of $1,000 to $5,000 per person. To protect your employees from high costs, choose as low an out-of-pocket maximum as you can afford. What is the term for the amount of money you must pay before your insurance company will pay on a claim?The amount you pay for covered health care services before your insurance plan starts to pay.
What's the correct name for the amount of money that a patient must pay before the insurance company begins to pay use letter keys to select choices?Deductibles — the amount of medical costs you pay yourself before your plan pays — are usually low. Good choice if: You're willing to pay more each month to have more costs covered when you get medical treatment.
What is the money you pay for health insurance called?The amount you pay for your health insurance every month. In addition to your premium, you usually have to pay other costs for your health care, including a deductible, copayments, and coinsurance.
What's the term for the total amount of covered medical services that a patient must pay for each year before the insurance company will begin to pay?The percentage of costs of a covered health care service you pay (20%, for example) after you've paid your deductible. The maximum amount a plan will pay for a covered health care service. May also be called “eligible expense,” “payment allowance,” or “negotiated rate.”
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