Out-of-Pocket Expenses

While the Affordable Care Act has increased consumer access to private health insurance plans, many buyers still have concerns about their healthcare costs. In 2014, only 24 percent of those enrolled in an Obamacare plan believed that they could access affordable care when needed.1 This is often due to the high out-of-pocket costs associated with many plans. In order to select the right health plan for a consumer’s healthcare usage, he or she must understand the basics of insurance out-of-pocket expenses.

Out-of-Pocket expenses are the portion of healthcare fees that an enrollee in a health insurance plan is responsible for paying, whether the insurance is a term health plan or an Affordable Care Act plan. Types of out-of-pocket costs include: deductibles, coinsurance fees, and copayments.

What is a deductible?

A deductible is the amount an enrollee must pay for covered medical services before an insurance plan will start covering costs. For instance, if your plan has a $3000 deductible, you must pay this amount towards covered healthcare expenses before your insurance will start paying for a share of costs. Some plans may provide cost-sharing on certain medical services, such as primary care visits, before a deductible is satisfied.

Coinsurance and Copayments

After a deductible is paid, health insurance typically pays for a portion of covered medicare care and the enrollee pays a portion. The enrollee payment comes in one of two forms: coinsurance fees or copayments.

What is coinsurance?

An enrollee begins to pay for coinsurance after their deductible has been met. A coinsurance fee refers to a percentage of a healthcare cost that they will be charged. For instance, an in-network doctor’s visit may have a 30% coinsurance rate. If the visit costs $100 total, the consumer will be responsible for paying $30, and the insurance company pays the remaining $70.

Enrollees should be careful when going out-of-network for healthcare services. An insurance plan will not have a contracted rate with out-of-network service providers and the consumer may be charged above and beyond and their normal coinsurance rate.

What is a copayment?

A copayment is similar to coinsurance, but instead of being figured as a percentage of a service’s cost, it is calculated as a flat fee for a medical service. For instance, your plan may charge a $33 copay for visiting an in-network specialist. As with coinsurance, in many cases copayments will not begin until the consumer has met their deductible.

Out-of-Pocket Limit

Your annual out-of-pocket limit is the maximum amount you pay for deductibles, coinsurance, and copayments within your coverage period. After this amount is reached, the plan pays 100% of covered medical services delivered in-network for the remainder of the year. Costs that do not have to be counted towards your out-of-pocket maximum include: premiums, out-of-network costs, and uncovered medical services.

  1. Gregory Scott, Paul Lambdin, Rod Kleinhammer. Public health insurance exchanges. Deloitte. http://www2.deloitte.com/us/en/pages/life-sciences-and-health-care/articles/health-care-consumers-health-insurance-exchanges.html

AFFORDABLE CARE ACT TAX. Term health insurance is health insurance outside of the Affordable Care Act ("Obamacare"). It does not include all ten of the minimum essential benefits of Obamacare and it does not cover pre-existing conditions. To learn more about the tax, its exemptions, and how to calculate the affordability of term health with the tax, see here. To learn more about the differences between Term health insurance and Obamacare, see here.