Deductible VS. Out of Pocket Max

Having an insurance policy for your healthcare takes significant financial responsibility off of the insured. As long as they pay a small share every month to the insurance company (called a premium), the insurance company will pay the majority of the cost of the insured’s medical expenses to offset the cost of healthcare. However, the insured still has a financial responsibility to meet before the insurance company will pay the full cost of anything.

Most beneficiaries understand that they have to meet a deductible before the insurance company will cover any expense. The amount the insurance company pays after the deductible is met also depends on the coinsurance percentage.

For example, you are insured in a health plan with a $3,000 deductible with a 20% coinsurance. During the year you have the plan, you receive two procedures: one costs $1,000, and the other costs $2,500. You would have to pay for the first procedure in full, and $1,000 will get taken off of your deductible. For the other procedure, you pay $2,000, which goes toward your deductible as well. Now that the deductible is met, there is still $500 leftover from the second procedure to pay for. Now that you met the deductible, you only have to pay 20% of the remaining $500 ($100) and insurance will cover the rest.

The out-pocket maximum comes in after you have met the deductible in full. This means that for the rest of the year you have the plan, you must pay the coinsurance percentage of whatever medical expense you get until you have spent the maximum amount written in your plan.

For example, let’s say you are the only individual on your plan with a $3,000 deductible and an out-of-pocket maximum of $7,900 (per the Affordable Care Act, no plan can have an out-of-pocket maximum greater than $7,900 for individuals). Those two procedures mentioned above satisfied the deductible, and you only had to pay 20% of the remaining $500 which was $100. That $100 went toward the $7,900, which brought the maximum down to $7,800. From now to the rest of the year, you would pay 20% of any of your medical expenses, and your copays for doctor’s visits or drugs, and those amounts that you spend out of your pocket go toward the maximum. If you have reached the $7,900 limit before the end of the year, the insurance company will pay for 100% of any other expense you accrue for the rest of the year.

If you have questions or are confused about which company is best for you, book a meeting with an agent. The goal is to lower your potential cost as low as possible while still receiving great medical care when you need it.

Making the right choices about your Medicare coverage can be smooth and simple. If you are in need of any assistance in transitioning to Medicare coverage, call an agent and set up a meet and greet. We are here to help you.