Understanding Health Insurance – Determining Out of Pocket Costs

At Reflex, we’re determined to help people dealing with knee pain get back to life through our non-surgical treatments, but many patients have questions about their insurance policy and its’ coverage for our services.

To help you deepen your understanding of insurance complexities, we are launching a series of blog posts. These will guide you in choosing the best plan to fit your treatment needs and enable you to ask your insurance provider the right questions.

The Essentials

When it comes to insurance, often the most pressing question is – how much you may be required to pay out of pocket. While the exact figures vary depending on your coverage and your medical needs, a few essential elements will help you understand how much you could personally be responsible for in a year:

• Premiums: The monthly (or quarterly) payments you make to your insurance company
• Deductible: The amount of expenses that you as the insured will need to pay out of pocket before your insurer will start paying for services
• Out of pocket maximum (OOPM): The most you will have to pay during a policy period for any and all health care services. Once you’ve reached your out of pocket max for the year, your insurance will pay 100% of the allowed amount for services covered through your plan
• Copayment: A fixed amount required by your insurer to be paid by you for certain appointments (such as doctor’s office or hospital visits) and/or prescriptions. Depending on your plan, these may or may not apply to your deductible, and may or may not be required once you’ve met your Out of Pocket Max
• Co-insurance: A health care cost you share with your insurance company. For example, if your coinsurance is 80%/20%, your insurer covers 80% of annual medical expenses and you pay the remaining 20%. This payment occurs after you’ve met your deductible, but only up your out of pocket maximum
• Allowed amount: The maximum amount an insurance company will pay for any given treatment or medical service. Often, providers, clinics, and hospitals will contract these rates with insurance companies

Once you have taken the time to digest these concepts, then you can determine how much of your medical costs you could be responsible for. By plugging in your policy information into a straightforward equation, you can determine the most you’ll pay out of pocket in a year for health insurance.

The equation is as follows:

Your premiums + your deductible + any coinsurance you must pay (up to your out-of-pocket maximum) + any copayments = the most you will pay for healthcare each year (for covered services).

Plugging in the numbers

Let’s give you a hypothetical individual insurance plan.

Say your monthly premium is $150, your deductible is $2,500, you have a 20% co-insurance and your out of pocket maximum is $5000. You do not have any copays on your plan. After you get in an accident (from which you will make a full recovery), you accumulate $30,000 in medical expenses.

Based on your plan, you would be responsible for the first $2,500 (your deductible). After you pay your deductible, you will only be responsible for 20% of the remaining bills up to $5,000 (your out of pocket max). Once you have paid out $5,000 in total, your insurance company will pay 100% of any additional claims for the remainder of the policy year.

Based on the equation and plan above here’s in the most you would be paying in a year:

Your premiums + your deductible + any coinsurance you must pay (up to your out-of-pocket maximum) + any copayments = the most you will pay for healthcare each year (for covered services).

($150 monthly premium) (12 months) = $1,800

$1,800 + $2500 deductible + $2,500 co-insurance up to your OOPM = $6,800

Although you accumulated significantly higher medical expenses, you would only need to pay $6,800 for all those bills.

Understand your plan

Although the equation for out-of-pocket costs is rather straightforward, it can be difficult to plug in your own numbers if your plan is structured differently. Call your insurance provider with the following questions:

• ‘Does my deductible apply to my out of pocket max?’
• ‘Do I still have to pay co-pays once I’ve met my out of pocket max?’
• ‘Do I have out-of-network coverage?’ (In other words, can you only see doctors approved by my insurance company?)
• ‘Can my insurance company decide to drop coverage for certain services or medications they were previously paying for within a policy year?’

Investing time in asking these questions will save you hassle and will empower you to make insurance decisions in the future.

Check back for the upcoming blog posts in this series to learn more about insurance.

At Reflex, we pride ourselves on being Portland’s knee pain experts. If you’re experiencing knee problems, give us a call today at (503) 719-6783.