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Insurance 101: Understanding how it works
What is a premium?
The insurance premium is the amount of money that is paid annually for dental, health or other insurance coverage. You can pay the premium payment in monthly, quarterly, semi-annual or annual payments. If your employer offers the insurance coverage as a benefit of your employment, your employer will pay most of the insurance premium. The balance of the insurance premium is deducted from your weekly, bi-weekly or monthly paycheck. You are enrolled in the program for one year and can opt of the plan during open enrollment; however, if you do opt out, your pre-existing conditions may not be covered if you opt back into the program at the next open enrollment period.
What is a deductible?
An insurance deductible is the amount of money that you must pay upfront before your insurance coverage begins. For example, if you have a $500.00 deductible, you will have to pay $500.00 out of your pocket before claims can be filed against your insurance coverage. In general, a deductible is set annually, so each calendar year, you will have to pay $500.00 out of pocket before your insurance coverage pays for accepted procedures. However, most insurance providers recognize out of pocket costs that are paid in the fourth quarter as part of your next year's deductible payment.
For example, if you are a new employee and your benefits become available in November and then you have dental or medical x-rays that cost $250.00, you pay the $250.00 out of pocket. Your insurance carrier will allow the $250.00 to be part of your annual deductible of $500.00, so you will only have to pay another $250.00 before your insurance will cover procedures.
What is a co-payment?
A co-payment or co-pay is your portion of the fee for services provided to you by a healthcare professional. Customary co-payments can range from $5 to $25 or more per office visit. A co-payment is paid prior to services being rendered at each office visit. It is the usually the only out of pocket fee that you will pay; however, you may also have co-payment for prescription drug insurance, if you have prescription drug insurance. If you do not have prescription drug insurance coverage, you may have a discount plan or other program that assists you in the paying the cost of prescription drug costs.
Co-payments for deferent services may differ. The co-payment for your primary physician may be $10.00 per office visit. Your dental provider co-payment may be $25.00 per office visit. You can find out the amount of your co-payment from your insurance provider or from your healthcare professional's office staff. Usually, your healthcare professional's office staff will need to see your insurance card or receive a toll free telephone number from you to check benefits and co-payment amounts, but they have vast experience in dealing with insurance companies, so you shouldn't worry about seeking their assistance.
What is co-insurance?
Co-insurance is the percentage of coverage that is provided by your employer and the percentage of coverage that you are responsible for. Rather than paying a co-payment for services, you are required to pay a portion of the fee for services provided by your healthcare professional. You will see figures like these: 90/10, 80/20 or 70/30. In the figures, the first number represents the percentage that will be covered by your insurance carrier and the second figure represents the percentage of service fees that you are responsible for. For example using the 80/20 split, if your services are billed at $100.00, your insurance will pay $80.00 of the bill and you will pay the remaining $20.00. You will always pay 20% of the fees billed for services rendered by your healthcare professional.
However, there is a chance that under a co-insurance clause, that you would become bankrupt if you or one of your loved ones are diagnosed with a disease or condition that requires expensive treatment. Therefore, insurance carriers have a co-insurance cap clause that sets the maximum amount of money that you will be required to pay on an annual basis. In general, the co-insurance cap is set between $2,000-$4,000, but some plans are significantly lower or higher. If you have a co-insurance plan, check with your insurance provider for the specific cap in the clause on your coverage.
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