Revisiting Deductibles, Coinsurance, and Max out of Pocket...And COPAYS

Hello everybody, Joe Devon with Healthcare Solutions Team, Healthcare Made Simple. Been a while since I made a video. Logged onto YouTube recently, saw over 600 subscribers, which I am dumbfounded by. I'm just an idiot insurance agent. But one of the videos I made years ago got more play than anything else, and it was strictly educational. And it was about deductibles, coinsurance, and out-of-pocket. So to kick off making more videos again, leading up to 2022's open enrollment for health insurance next year, I thought I'd touch on this again with a little bit of a different spin, because I got a lot of questions about different deductibles and different out-of-pockets in that video. So I'm just going to hop right into it. Typically, insurance has three numbers you should be very concerned with. One is deductible. This is the one everybody knows. Two is coinsurance, and three is the max out-of-pocket. Now coinsurance, and specifically max out-of-pocket, get much less play. They're much less discussed for people. But in my opinion, somebody that does health insurance on a daily basis, the maximum out-of-pocket is the most important number that you should know when it comes to your health insurance, by far. And I'm going to highlight that and explain that as we go through. So I'm taking two examples here. One plan has a $6,000 deductible, then it has 70% coinsurance, and an $85.50 max out-of-pocket. Now why $85.50? The government sets that as the maximum for ACA plans. So if you go through Obamacare or healthcare.gov or the Affordable Care Act, the highest max out-of-pocket is $85.50. I'm sure that's going to go up next year. It goes up every year. So most plans will use that as the maximum out-of-pocket. And then I'm going to compare that to a $500 deductible and how the medical bills and what you as the client would owe, how that would be different. And then at the end I'll very briefly touch on copays and how that would come into play. So let's look at the first plan first, $6,000 deductible. Let's say you end up in the hospital three days. I'm from Chicago. This is an underestimation when I tell you if you spend three days in the hospital, you're going to have your daily inpatient and it goes by coding by what you're going to be charged. But spending a day in the hospital, the doctor visits every time they come in and check on you, maybe some anesthesia, maybe medications. $15,000 for three days is probably an underestimation. But let's say the bill, the total bill is $15,000. Now, key point here, when you have health insurance and you go and network, typically you're going to receive a network discount off of the bill right off the top. So this is oftentimes not talked about as well. This is one reason you should have insurance because just by having insurance, there's a contract between the insurance company and the facility to give you discounts for your services. So on average, a discount is about 50%. Let's just keep it easy. So when you get the medical bill, they're going to say you owe $7,500 for your visit. Now, since you have insurance, obviously you're not going to pay the full amount. If you have a plan, and this gets into your responsibility, if you have a plan where the deductible is $6,000 and your bill is $7,500, well, the deductible is your responsibility. That is what you pay before the insurance company kicks in and starts covering the rest of the bill or covering a portion. So right off the bat, when you have a $6,000 deductible and you have a big medical bill, you're paying that deductible. But that doesn't mean you are done because there are still medical bills. There is still an additional out-of-pocket. So in regards to this bill, you would still, after deductible is met, okay? This is how deductible, coinsurance, and out-of-pocket relate. After deductible is met, coinsurance kicks in, where the insurance company pays their percent, 70%, and you're responsible for 30% of all the remaining bills until you reach this maximum out-of-pocket of $8,550. So you pay the initial $6,000, then you owe 30% of what would be $1,500 because that would be what was left, which is $4,500. So for this hospital stay in this example, you owe $6,450. I know a lot of people are saying, I can't afford that. I can't even afford $500, $1,000. This is a common issue with health insurance. There are some things we can do as insurance agents that are knowledgeable to eliminate a lot of these costs, which is why you can learn all this and drive yourself nuts, or you can always just call me, okay? And I can help you through choosing the right plan for you or your family. So that's how much you would owe on the visit, $6,450. And then any other medical bills that you might have throughout the year, remember, the insurance company is going to pay 70% of all those bills, but you still have to pay 30% of the rest of those bills until you pay out another $2,100 because, remember, you've got $6,450 of your total out-of-pocket, $8,550. You have another $2,100 to go, and then at that point, you are 100% covered, okay? So hopefully this makes sense, and this quells a lot of the confusion that you might have when it comes to these numbers and how they relate. Now let's talk about the $500 deductible, all right? So you'll see a lot of people that have a plan. They're, you know, bragging about the plan, my deductible's only $500, only $500. Well, what's the out-of-pocket? That's what I have to know. Although in this scenario, you are going to be better off. In the grand scheme of things, usually it's not going to matter much, but I'll tell you why. So with this same bill, remember, you paid the deductible. You got the same bill, $7,500 after discount. You'd pay your $500. You'd pay 30% of whatever's left of this bill, so $7,000. 30% of $7,000 is $2,100. So if you had the exact same plan except the $500 deductible, you'd be looking at $2,600 out-of-pocket that you're paying. Compared to $6,450, obviously much better, but here's the thing. It's not often you're just going to have a $15,000 bill with a $7,500. What if you have a $50,000 bill? What if you have a $100,000 bill? I had a knee surgery. It cost $75,000. That's how much I was billed, okay? I think I discounted down to about $45,000, but this was an hour-and-a-half knee surgery, okay? $75,000. You want to talk about why insurance is so expensive. Medical costs are very high. But let's take an example. What if you have a $100,000 bill? Does it matter if your deductible is $500 or $6,000? It doesn't because, in the end, you're going to meet this maximum amount-of-pocket anyway, okay? And we get insurance for the big stuff. So keep that in mind. It's very, very important, okay? Most people don't meet their deductible, but when they do, oftentimes it's people that are having severe medical issues with surgeries or hospital stays, and God forbid, even worse than that, the cancers and the heart attacks and those types of things. So out-of-pocket, maximum out-of-pocket, you have to know what that is because it illustrates your total exposure over the course of the year. And then lastly, there's every single health plan that has a summary of benefits, which will tell you how everything is covered, what the deductible is, what the coinsurance is. Sometimes you might be looking at your summary of benefits, and it'll say, inpatient hospital, $1,000 per day. That's what we call a copay, okay? So it gets rid of this coinsurance for the moment, and right from dollar one, you pay $1,000 for each day you're in the hospital. So obviously, in that scenario, you're only going to pay $3,000 out-of-pocket, $1,000 for each day you're in the hospital, okay? So that's how a copay would work. And with this same type of setup, let's say you have the $6,000 deductible, 70% coinsurance, $85.50, you might still have a copay on certain things like this. And this $1,000 goes towards the max out-of-pocket. So you would still owe $55.50, technically. But again, if you're going to have a lot of medical bills, max out-of-pocket is the most important. So I hope this helped. It's very similar, although different, from a previous video I had made on this. And this is just such an important topic that I felt like I had to touch on it again. I'm going to start making some more videos about what's coming up for next year with health insurance. So please follow me. Send my information out there to whoever needs help. You can always call me on my cell or text me or Facebook message me, whatever. I'm at 708-566-6589. Thanks.