Jane Dotson
Health insurance is designed to protect individuals from high medical costs, but it doesn't always prevent them from accruing medical debt. In the United States, even those with health insurance often struggle with medical debt, with a survey finding that 55% of respondents carry some form of medical debt. This is often due to high deductibles, which must be paid out of pocket before insurance benefits kick in. Insurance plans also typically require copayments and coinsurance, which are additional out-of-pocket costs for each instance of care. Once an individual reaches their out-of-pocket maximum, their insurance company will cover 100% of the remaining medical expenses for the year. This varies depending on the type of plan and can range from 60% to 90% coverage after the deductible has been met.
| Characteristics | Values |
|---|---|
| Percentage of medical bills covered by health insurance | 60% to 90% after meeting the deductible |
| Average annual deductible for individual coverage | $4,364 for Affordable Care Act marketplace plans |
| Average annual deductible for employer-provided insurance | $1,669 for individual plans |
| Average annual deductible for small companies (200 employees) | $2,379 for individual plans |
| Out-of-pocket maximum | Once the maximum is reached, the insurance company covers 100% of covered services for the rest of the year |
| Copayments and coinsurance | Fixed amount or percentage paid each time healthcare is received |
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What You'll Learn
Deductibles and out-of-pocket expenses
A deductible is the amount of money you need to pay before your insurance plan starts to pay for your healthcare services. For example, if you have a $1,000 deductible, you pay the first $1,000 of covered services yourself. After that, your insurance plan will start to pay a percentage of the costs, depending on the plan you have.
Some people choose high-deductible plans because they tend to come with lower monthly premiums, which can save money if you are in good health and don't expect to need much healthcare. However, this means that you will have to pay a larger amount out of pocket before your insurance starts to pay.
Once you have met your deductible, you will still need to pay any applicable coinsurance and copayments. Coinsurance is the portion of the insurance bill you are responsible for after you've met your deductible. For example, if your coinsurance is 20%, and you receive $200 worth of services, you will pay $40 and your insurance will cover the remaining $160. Copays are fixed amounts you pay out of pocket for a covered healthcare service, for example, your plan may require you to pay $20 for every visit to a specialist doctor.
The out-of-pocket maximum is the most you can pay for covered services per plan year before your insurance covers 100% of the covered service costs. For example, if your plan has a $3,000 out-of-pocket maximum, once you pay $3,000 in deductibles, coinsurance, and copayments, the plan will pay for any covered care for the rest of the year. Your premium payments do not count towards your out-of-pocket maximum, and you will continue to pay them even after you have met your out-of-pocket maximum.
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Coinsurance and copayments
Copayments, often shortened to copays, are upfront fixed fees. They are flat fees paid each time a specific service covered by the insurance is received. For example, a plan might charge a $15 copay for a generic prescription drug, $30 to visit your primary care doctor, or $50 to see a specialist. Copayments are negotiated by the insurance company with in-network providers and do not usually count toward your deductible.
Coinsurance, on the other hand, is a percentage of the cost of covered care that you pay when receiving treatment. It is calculated as a percentage of an eligible health expense and varies depending on the type, size, and scope of services. For example, if you have an 80/20 health insurance plan, your insurance will cover 80% of the cost, and you will be responsible for the remaining 20%. Typically, policyholders pay between 10% and 40% of their medical costs, with insurers covering the rest.
The amount of out-of-pocket expenses incurred by the policyholder depends on the type of health insurance plan. For example, Affordable Care Act marketplace plans, also known as Obamacare, tend to have high deductibles, which can result in high upfront costs. In contrast, high-deductible health plans may offer low or no copayments or coinsurance fees. Patients requiring frequent care may opt for a plan with lower copayments and coinsurance, while those seeking infrequent care may consider plans with higher copayments and coinsurance.
It is important to note that copayments and coinsurance contribute to the out-of-pocket maximum, which is the most a policyholder will have to pay out of pocket each year. Once this maximum is reached, the insurance company is responsible for 100% of the costs of covered services for the remainder of the policy year.
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Monthly premiums
For example, the average annual deductible for individual coverage under Affordable Care Act marketplace plans, also known as Obamacare, was $4,364 in 2020. These plans often come with lower monthly premiums. On the other hand, employer-provided health insurance has an average annual deductible of $1,669 for individual plans, with slightly higher premiums.
It is important to note that the choice between a high-deductible/low-premium plan and a low-deductible/high-premium plan depends on individual preferences and anticipated healthcare needs. While high-deductible plans offer lower monthly premiums, policyholders may be less likely to seek preventive care due to high upfront costs, potentially leading to unexpected medical problems and debt.
Additionally, the percentage of medical bills covered by insurance depends on the specific plan. After meeting the deductible, insurance plans typically cover between 60% and 90% of covered expenses, with the remaining 10% to 40% paid by the individual. This percentage coverage also applies to prescription drugs and other covered health services.
In summary, monthly premiums are a significant component of health insurance costs, and they vary based on the chosen plan's deductible, out-of-pocket maximum, and anticipated healthcare needs. It is essential to carefully consider these factors when selecting a health insurance plan to ensure adequate coverage and affordability.
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High medical debt
Despite over 90% of the population having some form of health insurance, medical debt is a persistent problem in the United States. People with complex health needs that require ongoing care can see medical bills pile up over time. For example, people living with cancer have higher levels of debt than those who have never had cancer. High deductibles and other forms of cost-sharing can also contribute to unpayable medical bills, despite individuals being insured.
The total amount of medical debt in the US is difficult to estimate, but it is estimated that people in the country owe at least $220 billion in medical debt. A small share of adults accounts for a large share of the total; 0.3% of adults account for more than half of the total medical debt. A quarter of Americans owe $10,000 or more in medical debt, and half of them have health insurance.
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Preventative care
The ACA requires that most health insurance plans cover a range of preventive services without imposing additional costs on patients. These services are typically provided at no cost to the patient when delivered by an in-network provider. This includes Marketplace health plans and many employer-provided plans, which must cover certain preventive services, such as shots and screening tests, at no additional cost.
The preventive services covered by the ACA include annual check-ups, immunizations, flu shots, and various screenings for conditions such as cancer, diabetes, obesity, and sexually transmitted infections (STIs). For women, preventive services also include mammograms, cervical cancer screenings, and prenatal care. These services are recommended by expert medical and scientific bodies, including the U.S. Preventive Services Task Force (USPSTF) and the Advisory Committee on Immunization Practices (ACIP).
It's important to note that diagnostic tests and treatments that arise from preventive services may not always be covered by insurance. For example, if an issue is detected during a preventive screening, the subsequent diagnostic tests and treatments may be subject to cost-sharing. Additionally, if a patient chooses to see an out-of-network provider when an in-network provider is available, insurers may charge for the office visit and the preventive service.
Overall, preventive care is an essential aspect of maintaining good health and catching potential issues early on. By providing coverage for preventive services, health insurance plans can help individuals stay healthy and proactive in managing their health.
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Frequently asked questions
You may still be responsible for a portion of the costs, known as a coinsurance, after your insurance provider has paid their share. You may also have to pay a deductible, which is a fixed amount that you need to pay within a defined period before your insurer covers some costs.
Coinsurance is a way for you to share costs with your insurance provider. Instead of paying a fixed amount each time, you pay a percentage of the total costs. For example, your insurance company may pay 80% of the cost, and you pay the remaining 20%.
A deductible is a fixed amount that you pay for covered health services before your insurance plan starts to pay. For example, if you have a $1,000 deductible, you pay the first $1,000 in covered services. After that, your insurance plan pays a percentage of the costs, depending on your plan.
A copayment, or copay, is a fixed amount you pay each time you receive care, like $20 for a doctor visit. Coinsurance, on the other hand, is a percentage of the total cost that you pay.
