Over the years I developed a simple formula which helps me assist my clients choose the right health insurance plan.
The formula consist of the following:
1- Office visit co-pay: Co-pay is meant how much you pay the Dr. every time you visit him. Example: if you see under the
heading " Office visit co-pay" $20.00 That means every time you visit the Dr. he charge you only $20.00 for the visit.
2- Annual deductible: is defined as the amount of medical bills you pay from January 1st till December 31st before the
insurance company start paying. Example: A health insurance plan has an Annual Deductible of $1000.00 on Hospitalization,
X rays and lab works. During the year of 2004 Joe had a total medical bills of $5000.00. In that scenario Joe pay 1st the
deductible which is a $1000.00 then insurance company start paying toward the remaining bills.
3- Co-Insurance: Defined as the percentage you share paying the medical bills with the insurance company, usually after
you paid the annual deductible. Example: In 2004 Joe had a total medical bills of $5000.00. assuming Joe has an annual deductible
of a $1000.00 and a co-insurance of 40%. Joe pay 1st the $1000.00 then he pay 40% of the remaining $4000.00 The insurance
company pay their 60% share and the bills are paid in full.
4- Annual out of pocket maximum. Defined as the total amount paid out of your pocket annually including your Annual deductible
and co-insurace combinded. Example: assuming your health insurance plan has an Annual out of pocket maximum of $5000.00 Lets
say Joe had a total medical bills of $20,000.00 in 2004 Joe's plan has a $1000.00 deductible and 40% co-insurance. Joe pays
the $1000.00 deductible then he pays his 40% co-insurance of the remaining bill which is 40% of $19000.00 = $7600.00 that
makes a total of $8600.00 from Joe's pocket - the Deductible $1000.00 + Co-insurance $7600.00 But does he really owe $8600.00
in medical bills? the answer is no! becuase the Annual out of Joe's pocket maximum as mentioned above is $5000.00 So Joe only
owing $5000.00 in medical bills because that is the maximum Joe will pay in a year no matter how high his medical bills are.
The annual out of pocket maximum is your safety net. In case of a major catastrofic event where your medical bills are very
high.
Now you know what is the difference between office visit co-pay, annual deductible, co-insurance and annual out of your
pocket maximum.
What to look for in a health insruance plan 1st, is the annual out of pocket maximum - your safety net. Then the annual
deductible, co-insurance and last Dr. office visit co-pay. here is an example how to use the formula described above:
- Scenario A: health insurance plan has $40.00 office visit co-pay, $2000.00 annual deductible, 40% co-insurance and an
annual out of pocket maximum (your safety net) of $4000.00
-Scenario B: health insurance plan has $20.00 office visit co-pay, $1000.00 deductible, 30% co-insurance and an annual
of pocket maximum of $8000.00
Considering what you have learned so far, which health insurance plan you consider better ? the one in Scenario A or B?
To find out for yourself, take different examples considering the amount of total medical bills for that year and use some
math to come up with an informed conclusion on which plan is better and more suitable to your needs. If you use the example
mentioned above with $20,000.00 total medical cost for the year you will discover that the health insurance plan in scenario
A is better than the one in Scenario B.
I hope this information was of help to you, I am always willing to help so don't hesitate to contact me.
Best of luck.
Saffouh Dabbousssi
