When you sign up for a medical insurance plan you agree to pay certain amounts as a cost-share between you and your insurance company. Your monthly insurance premiums are totally separate and do not apply to the cost-share amounts you are responsible for. The common terms for these cost-share amounts are copay, coinsurance, and deductible.
The deductible is the amount you agree to pay before your insurance company will start to pay a percentage of your medical claims. After your deductible has been met there is either a copay or a coinsurance cost-share amount you must pay alongside the amount your insurance will pay.
A copay is a set amount that you pay at each visit and it doesn’t change visit to visit. A copay remains the same amount whether the charges for your medical visit are high or low as your insurance company will be responsible for paying for the rest of that visit.
Coinsurance, however, does change depending on the amount of charges on each claim for each date of service that you receive treatment. The coinsurance amount is based on the percentage you agreed to pay alongside your insurance company’s payment.
Your insurance company decides how much they will allow us to bill for each procedure, often called the Allowable. They will pay their percentage of the Allowable leaving the remaining percentage as your responsibility to pay. For example, you have a 20% coinsurance according to your insurance plan and you are seen for a procedure. Your insurance company then decides the Allowable for a procedure; the Allowable is 100% of what needs to be paid for that procedure. Your responsibility is to pay 20% of the Allowable and your insurance company is responsible for the other 80%.
Another amount to be aware of when signing up for an insurance plan is called the Out-of-Pocket (OOP) maximum. This amount is the most you will be required to pay in a policy period which is often a year. Once you have met this OOP amount your insurance plan will pay your claims for covered services and procedures at 100%. Your deductible, copay, and coinsurance payments will count toward this maximum amount. There are a few plans out there that do exclude the deductible from the OOP maximum. These plans are more rare than common.
If you have dependents (a spouse or children) on your insurance plan with you there will be what is called a Family deductible and a Family out-of-pocket maximum that is different and higher than just your individual deductible and OOP maximum. The Family deductible can be met when, depending on the insurance plan amount, multiple family members have met their deductible. This family deductible will probably not apply unless you have two or more dependents on your plan in addition to the main policyholder. Once the Family deductible has been met any other family members under the plan who haven’t met their individual deductibles yet will be exempt from having to pay the rest of their deductibles. The Family out of pocket maximum works in the same way.