Let’s cover the basics of how your NC health insurance policy works. One of the most confusing things for people getting North Carolina health insurance is figuring out all the insurance terms….if you understand the terms then you will understand the basics of health insurance. Often times we get calls from people and they have no clue as to what type of coverage they have. They see the terms “deductible”, “co-pay”, “coinsurance” and “out of pocket maximum (OOP)” all over their paperwork, but really do not understand what they mean. Let’s look at each one individually.
What is co-pay?
A Co-pay is a set amount that the patient pays for each visit to the doctor or each prescription they get. Many policies have set co-pay for visits to a primary physician and a slightly higher one for visits to specialists. For prescriptions, co-pays may be tiered so that generic drugs have a lower co-pay and high-end name brand drugs have a higher co-pay. For instance the common drug Zocor, used to treat elevated cholesterol has a retail cost of around $185 for a 30 day supply. With a drug copay this drug may cost only $50. If you were to take the generic equivalent to Zocor, which is simvastatin, you would likely pay only a $10 copay
What is a deductible?
The policyholder must pay this amount before health insurance begins to cover costs during a policy year. Many policies have deductibles that range from $500 to $5,000. Let’s say you have health insurance with an individual deductible of $1,000. If you have to go for a procedure in the hospital at the beginning of the year that costs $5,000, the health insurance will only work on $4,000 of that total. The first $1,000 comes out of your pocket. The thing that can be confusing is that the deductible often only applies to care associated with hospital or outpatient procedures.
What is coinsurance?
Coinsurance can be confusing for many people. It refers to the percentage of the bill that the policyholder owes after the deductible is met. So, using the above example, there is $4000 left on the bill. If your policy requires you to pay 20% coinsurance and the insurance company covers the rest, you would be responsible for paying the $800 in co-insurance and the insurance company would pay the remaining $3200.
Another term along the same lines is coinsurance maximum. This is the maximum amount that you would pay in regards to coinsurance. If you have 80/20 coinsurance with a $2,000 maximum then this means that once you have met the deductible you will be responsible for 20% of the next $10,000 in claims (i.e. $2,000). Once you have reached this amount then insurance pays 100% after that.
What is Out of Pocket Maximum (OOP)?
Obamacare has made some changes to this which will reduce a lot of peoples exposure to plans they have had prior to 2014. In 2014, the OOP for an individual is $6,350 and for a family $12,700. OOP is an aggregate of ALL your costs…copays + deductibles + coinsurance + prescriptions. Once you have reached the OOP then the plan pays 100% thereafter for the remainder of the calendar year. This is a big changes as before prescriptions and office visit copays did not count towards this amount.
So understanding these 4 concepts will go a long way in understanding what your risk and exposure is with your new NC health insurance policy.
Here is a brief video that nicely explains this. Because it is a few years old some of it is not correct for Obamacare but will give you a good understanding of the principles (there are no longer lifetime maximums or cost sharing (copays) for preventive care).