Health insurance can help you to afford the healthcare you need, but if you’re confused about just how health insurance works, you’re not alone. The process in which your health insurance pays your healthcare expenses is a confusing one with lots of variables. Let’s break it down.
When you buy your health insurance policy, you’ll agree to pay a certain amount in your monthly premium for your coverage. Each policy also has a certain deductible, co-payment, and coinsurance that will affect what you’ll pay out of pocket for your healthcare.
The deductible is a set amount that you’re required to pay toward your healthcare expenses before your health insurance contributes. Deductibles can cost thousands of dollars, meaning you’ll be responsible for all of your healthcare costs until you reach the deductible.
Most policies require you to make a co-payment toward doctor visits, specialist visits, and other types of appointments. You’ll pay the office directly, and then the provider will send the bill for the rest of your appointment costs to your insurance company.
Your co-insurance refers to the portion of your medical expenses that you’re responsible for paying. For example, if your co-insurance is 20%, your insurance will pay for the remaining 80% of your costs. Your co-insurance applies even after you’ve met your deductible.
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Once you’ve paid your portion of your healthcare costs, like your co-payment, to your service provider, the provider will bill your insurance company for the remaining costs.
If you go to an in-network provider, the provider will have a contract with the insurance company, which includes reduced rates for services. Your insurance company will cover the eligible expenses up to that maximum set amount; anything over the amount won’t be paid, but you won’t be responsible for paying the difference.
For example, if your insurance company has negotiated a maximum rate of $500 for a service, your provider could bill your insurance company for the remaining $700 after you’ve paid your co-pay. The insurance company will only pay $500, and the remaining balance won’t be paid.
Things work differently when you see an out-of-network provider. Since an out-of-network provider won’t have a contract with your insurance company, they can bill the full amount for services.
Your insurance company will still cap what they will pay for services, but you will be responsible for any remaining balance.
Using the example above, your provider might charge $1,000 for the service after you’ve paid your co-pay because there is no negotiated price. Your insurance company will only pay $500, and you’ll be responsible for the remaining $500.
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Since receiving care from an out-of-network provider can be so expensive, it’s important to choose a health insurance policy with a network that includes the doctors you often see. You can get free health insurance quotes online today to compare policies and find one that offers the coverage and the network that you need.
Paige Cerulli Paige Cerulli is a freelance content writer and journalist who specializes in personal finance topics. She graduated from Westfield State University and brings more than a decade of professional writing experience to the ConsumerCoverage team. Paige’s work has appeared in outlets including USA Today, Business Insider, and more.
