When choosing a Medicare plan, you will come across terms that might not have any meaning to you. It’s important to know what these terms mean in order to choose the right plan for you and prepare for the costs you will be paying. Here are five common terms to know as you start your Medicare process.
1. Deductible
A deductible is the amount you pay for healthcare services before your plan contributes toward the cost of services. For example, if your deductible is $3,500, you will have to pay $3,500 out of your own pocket for any health service before your insurance will pay. Typically, deductibles are paid on an annual basis.
2. Premium
Your premium is the amount you pay to your insurance company to keep your coverage in force. This is usually paid on a monthly basis but can also be quarterly, semiannually, or annually depending on the private insurance carrier. Different plans have different premiums typically ranging from $0-$200 monthly.
3. Coinsurance
Coinsurance is how much you will pay for a covered health service. Usually, this is a percentage of the total bill that you will pay after you have met your deductible for the year. For example, if you have a doctor’s visit that costs $200 and your coinsurance is 20 percent, you will pay $40 for this health service. However, if you have not paid your whole deductible for the year, then you will pay the entire cost of the health-care service until the deductible is paid.
4. Maximum Out-of-Pocket (MOOP)
Some plans have an out-of-pocket maximum, which means there is a limit on the amount of cost share you will have to pay each year. Once you have paid this amount including your deductible, coinsurance, and/or copays, your insurance company will pay 100% of your Medicare approved medical expenses for the remainder of the year. This maximum out-of-pocket does not include prescription drug costs.
However, sometimes your deductible will not count towards your out-of-pocket maximum. Therefore, if your deductible is $500 and your out-of-pocket maximum is $6,000, you could end up having to pay $6,500 in a year if your deductible does not count towards your maximum. It’s important to know how your plan calculates your out-of-pocket maximum.
5. In-Network and Out-of-Network
When you choose a Medicare Advantage plan, the insurance company you choose will have a network of health care providers. Depending on the type of plan you have, your insurance may only cover Medicare approved expenses within this network. You will pay less if you stay within this network. The in-network and out-of-network costs will change depending on the plan you have, but typically it will cost you more to visit a health care provider out-of-network. For more information on in- and out-of-network costs, check out this article.
Understanding these terms is an important first step in choosing which Medicare plan is best for you. If you have more questions, learn more about Medicare here or contact a licensed Medicare agent.
