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Health Insurance 101: What Are You Really Paying For
Health insurance plans in the US are expensive, you should know what your plan covers and what you’re paying for.
Most US universities require international students on the F-1 Visa to be enrolled with a health insurance that meets their criteria.
Some universities make it mandatory for international students to enroll with the university’s health insurance plan, and some universities allow their international students to waive the university provided health insurance, as long as students are enrolled in another health insurance plan that meets the university’s set criteria. Medical costs in the US are extremely high and not having health insurance can turn out to be rather expensive.
Pro Tip: we strongly recommend international students to enroll in a health insurance plan, even if the university / college does not require you to have one.
When deciding which plan to go with, it’s important for you to understand some basic terminologies while comparing your options. The price you pay to buy the insurance plan isn’t the only thing you’ll be paying for. Enrolling in a health insurance plan does not mean that your plan will be paying all your medical bills. You must understand how health insurance works and what your plan covers.
This is the price you pay to buy your health insurance plan and determines how long you are "covered" by that policy. Premiums are generally paid on a monthly basis but US universities often include the entire semester or academic year’s premium as part of the overall bill that you pay before you begin your semester or academic year. Think of it as the payment that keeps your health insurance policy active. If you’re comparing plans, ensure that the plan with a higher premium is providing you greater coverage overall.
Deductible is the amount of money that you must pay from your own wallet, over and above the premium you pay for your insurance plan, before the plan “kicks-in”. Think of it as the minimum amount that you have to pay out of your own pocket before your plan starts paying for your healthcare and medical expenses.
Typically, plans with lower premiums have a higher deductible and plans with higher premiums have a lower deductible.
For example, when your plan mentions a $200 deductible, it means that the first $200 of healthcare or medical expenses that you incur, must be paid by you, before the insurance starts paying for your expenses.
Note: most insurance plans allow your co-pay and co-insurance payments to count towards your deductible.
A co-pay (short for “co-payment”) is a fee that you are required to pay out of your own pocket when you seek healthcare services, including but not limited to visiting a doctor, picking up your prescriptions from a pharmacy, or going to an Emergency Room. Co-pays are typically small fixed-fees compared to the overall bill for the medical service you seek.
Typically, co-pay kicks in once you’ve met your deductible, but some plans allow the co-pay amounts to count towards your deductible. Health insurance policies with higher premiums are likely to have lower co-pay amounts, and plans with lower premiums are likely to have higher co-pay amounts.
For example, assume your health insurance plan comes with a $200 deductible and lists $20 as co-pay for your medical visits, and the co-pay counts towards your deductible. If you visit a doctor and the bill is $300, here are three scenarios:
If you’ve already met your deductible (i.e. already spent $200 in the past) through previous medical or healthcare expenses, you’ll only be required to pay $20 as co-pay and your insurance plan will pay the remaining balance of $280 ($300 - $20).
If you’ve paid $0 towards your deductible (i.e. you haven’t met your deductible), you would end up paying $220 ($200 towards meeting your deductible + $20 as co-pay for your visit), and your insurance will cover the remaining $80 ($300 - $220).
Let’s say you’ve paid $100 already towards your deductible (you've spent $100 in the past), you would end up paying $120 for your visit to the doctor ($100 towards meeting your deductible + $20 as co-pay), and your insurance will cover the remaining $180 ($300 - $120).
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Co-insurance is the amount that you pay against a medical claim, and is expressed as a percentage opposed to a fixed dollar amount, that kicks in after your deductible has been met, but gets capped once you have reached your “out-of-pocket maximum”. (Please read the next section to understand “out-of-pocket maximum”)
It’s common to see a “80/20” co-insurance, i.e. once you’ve met your deductible, you are required to pay only 20% of your total medical bill (till you have reached your out-of-pocket maximum), and your insurance covers the balance. Most insurance plans allow your co-insurance payments to count towards your deductible.
For example, assume your health insurance plan comes with a $1000 deductible, and a 20% co-insurance for your medical costs. If you require a surgery that costs $3000, here are two scenarios:
If you have paid $0 towards your deductible (i.e. you haven’t met your deductible), you would end up paying the entire $1400 for your surgery ($1000 towards meeting your deductible + $400 as co-insurance). Your co-insurance only kicks in once you’ve met your $1000 deductible, and your co-insurance kicks in for the remaining balance of $2000 ($3000 surgery bill minus the $1000 that was paid towards deductible). With a 20% co-insurance, the $400 in co-insurance is calculated as 20% x $2000, i.e. the remaining balance for the medical cost.
If you’ve already met your deductible (i.e. already spent $1000 in the past) through previous medical or healthcare expenses, your co-insurance kicks in immediately and you would end up paying $600 as co-insurance, i.e. 20% x $3000, and your insurance will cover the remaining balance of $2400.
An out-of-pocket maximum is the maximum dollar amount that you will be paying for healthcare while your insurance is active. It’s the fixed dollar amount and is the most you will ever spend, including all deductibles, co-payments, and co-insurance amounts. Once you hit your out-of-pocket maximum, your health insurance will start paying for 100% of your healthcare and medical service costs.
For example, assume your health insurance plan comes with a $200 deductible, $20 in co-pay which counts towards your deductible, a 20% co-insurance for your medical costs, and an out-of-pocket maximum of $1000. Further assume you’ve paid $0 towards your deductible (i.e. you haven’t met your deductible).
Assume you visited your doctor ten times and it cost you $20 for each visit. You’ve paid $200 (10 visits x $20/visit) as co-pay and met your deductible. If you require a surgery that costs $5000, you would end up paying only $800, i.e. $1000 out-of-pocket maximum minus the $200 deductible.
Technically, your co-insurance would kick in since you’ve met your deductible, and you would be paying $1000, i.e. 20% of ($5000 - $0), as co-insurance. But since your out-of-pocket maximum is $1000, and you’ve already paid and met your $200 deductible, you will be capped at $1000 in overall expenses, thereby paying only $800. Your insurance will pay the remaining balance.
It’s stressful enough to be dealing with the healthcare system when you require medical attention; you must carefully read through your health insurance plan to understand your overall coverage and benefits in advance to be prepared for any emergencies.