Nothing is free, least of all U.S. healthcare. Patients pay fees to insurance companies in order to receive health care coverage. These costs add up at various points of care or throughout the year, even when patients don’t pursue medical care. When health issues arise, benefits kick in. Ideally, the patient’s health insurance plan will be the middleman between the patient and the health care provider.
There are several types of payments that a patient must pay to the insurer to receive coverage.
A portion or the entirety of healthcare costs can be covered by insurance, depending on the particular expenditure and quality of the health insurance plan.
Break it Down
Most health insurance plans feature several forms of payment. While there are notable differences between private and public health insurance, payment forms are largely the same across plans. The numerical value of payments may vary, but here are the pre-reqs for most insurance plans:
Monthly payments to keep coverage “active.” Subscribers pay whether they use the insurance or not.
A fixed payment that subscribers owe the company for a given service.
→ $25 for a doctor’s check-up
The minimum amount of money subscribers pay for covered healthcare before insurance kicks in and starts splitting the cost.
The percentage subscribers pay out-of-pocket for a given service until the out-of-pocket maximum is reached.
→ 30% of a procedure is coinsurance paid out-of-pocket and the other 70% is covered by health insurance.
The total cost paid by the patient in a year (excluding premiums), after which health insurance covers 100% of medical expenses.
Add It All Together And…
Let’s say that Connor, a beneficiary of health insurance plan Healthcare Huddle Insurance, pays a premium of $200 every month. Every time Connor visits his primary care physician, he pays a $25 copay.
That year, Connor’s medical expenditure was a $5,000 surgery. To hit his deductible, Connor has to pay $2,000 out-of-pocket. Now that Connor has reached his deductible, Healthcare Huddle Insurance will now help cover the other $3,000. With a coinsurance of 30%, Connor pays $3,000 x 0.30 = $900. Healthcare Huddle Insurance will chip in $3,000 x 0.70 = $2,100.
Suppose Connor has a rough year and incurs another medical expense which brings his deductible, coinsurance and copayment to $6,000 for the year. Once Connor reached this out-of-pocket maximum of $6,000, Healthcare Huddle Insurance will cover 100% of his remaining medical costs. Whew, it really does all add up!
What’s the Point?
Good question. Let’s go back to Connor. If Connor is healthy and rarely interacts with the healthcare system, why would he agree to pay this complex web of fees? The answer isn’t simple, but to put it simply, medical services cost a lot in the U.S. Healthcare is not affordable for the majority of individuals, so the health insurance system aims to spread out the healthcare costs across a larger pool of people. With expanded access to health insurance, more people can enroll (shoutout ACA). Some high-risk groups use healthcare at a higher rate, while healthy individuals may be chipping in for a rainy day.
Outside the Huddle
Insurance Coverage of Emergency Care for Young Adults under Health Reform | NEJM
Workers With Health Insurance Face Rising Out-of-Pocket Costs | NYT
Cost-Sharing Waivers and Premium Relief by Private Plans in Response to COVID-19 | KFF
On the Money: Confronting fresh health insurance deductibles | Associated Press
It’s open enrollment season. Here’s what you should do differently this year | CNN
Reviewed by Geetika Rao, MPH | Edited by Nidhi Mahagaokar, MPH and Paris Ghazi | Fact checked by Julia Radossich, PA-C