Cost-sharing under Health Insurance plans

June 15, 2018


Almost all the Health Insurance companies offer plans with standardized features and benefits which are common across the spectrum. Health Insurance plans in the U.S. companies and Indian companies are different in many aspects but has some common features as well. One of the common aspects of these insurance plans is the “Cost-sharing concept”. As the name suggests this feature infers Insured to share medical costs with the Insurance company.

An insurance company does not cover 100% medical expenses except in some predetermined cases. Insured has to pay some percentage of the medical bill or a fixed amount for either each sickness/treatment or upto a certain limit depending upon pre-determined terms.

Although overall concept or the bottom line of cost sharing feature among plans from different Insurance companies are same but the exact terms of the feature vary from each other.

These variations have a direct impact on the premium defined by the Insurance underwriter. So, if the variations result in the Insured paying more for a medical expense under cost-sharing feature then the premium of the plan would be lower than the premiums of other plans in which variations of these features result in the Insured paying less for a medical expense.

In this blog, all the features of the Health Insurance plan related to cost-sharing by the Insured and the Insurance company, are described. Knowing these features will help students to differentiate various Insurance plans better. This feature can be considered as one of the bases of evaluating various plans and choosing the one which has more weight according to your priorities.

Following are the features under the cost-sharing concept

Deductible: A deductible is the fixed amount insured pays for medical treatment. This amount is either has an Annual limit or a per injury/sickness limit. Let’s say a plan’s deductible is $500 per year. Insured will pay $500 as deductible for the all the medical bills. After this limit is reached Insured will not pay anything as deductible. Insured would be paying other elements under cost-sharing concept as decided under the schedule of benefits.

Co-insurance: Co-insurance is referred to the percentage of each medical bill amount to be paid by the insured. Generally, this percentage ranges from 10% to 50%. In the schedule of benefits, the percentage displayed is either the one to be paid by the insurance company or the one by the insured. This is totally at the discretion of the company. For example, if your coinsurance given is 90%, that means that your insurer covers 90% of annual medical expenses and you pay the remaining 10%.

Co-payment: A Co-payment or co-pay, as commonly referred to, is a fixed payment for a covered service, paid when an individual receives particular medical treatments as mentioned in the schedule of benefits. Generally, co-pay is applied to each physician’s visit, emergency room visit & purchase of prescription drugs.

Out-of-Pocket Maximum: The maximum amount insured has to pay for covered services in a plan year. This amount is the addition of the amounts paid as Deductibles, Co-payments, and Co-insurance. After the out of pocket maximum pre-determined limit is reached the health plan pays 100% of the costs of covered benefits.

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