To illustrate with an example, let’s use a person — we’ll call him Finn — to explain the basics of health coverage. Your costs would be different based on your policy, so you’ll want to do your own calculations when determining your financial responsibility for your healthcare costs.
The basics: Finn is single and has an annual deductible of $1,200. His insurance plan also has copays, which do not count toward his deductible. After he meets the deductible, his insurer pays 80% of his medical bills, leaving Finn with coinsurance payments of 20%.
The scenario: Fin goes in for an annual checkup and some routine blood work. Because he goes to an in-network provider, this is a free preventive care visit. However, based on his physical, his primary care physician recommends Finn get an MRI.
Copays for an in-network specialist on his plan are $50, which he must pay, while his insurer will cover the rest of the MRI costs. The least expensive MRI provider in his area is in his insurer’s network and will charge $1,000 for the MRI, including the radiologist fees.
Imaging scans like this are “subject to deductible” under Finn’s policy, so he must pay for it himself, or out-of-pocket, because he hasn’t met his deductible yet. So his insurance won’t pay anything to the MRI facility.
- Total out-of-pocket costs : $50 for the radiologist copay + $1,000 for the scan = $1,050.
Much to his relief, Finn’s MRI scan comes back normal. Later in the year, he falls while hiking and injures his knee. Finn knows which emergency facilities are in his provider network, so he heads to an in-network emergency room, for which he has a $100 copay. The total bill for the emergency room comes to $3,500.
Finn has only paid $1,000 of his $1,200 deductible so far, so hhe will be responsible for the first $200 of the ER bill. He has to pay this in addition to the $100 copay, after which his insurer pays a portion of the total ER bill. After he pays his portion ($300), the ER bill will be $3,200. Of this, his health plan will pay 80%, or $2,560, leaving Finn with the remaining 20%, or $640.
- Total out-of-pocket costs: $100 for the ER copay + $200 for remaining deductible + 20% of remaining ER bill ($640) = $940.
Finn has now paid $1,990 toward his medical costs this year, not including premiums. If he’s injured again or gets sick, he still will have to pay 20% of his medical bills until he reaches the out-of-pocket maximum on his plan.
Understanding how your health insurance works can save you money and grief down the road — maybe at a time when you’ll need it most. What you know in advance you can plan in advance.