In some health insurance policies, there is a certain amount of risk that the policyholder self-insures. This risk is referred to in the policy as the deductible and the out-of-pocket maximum. While these two categories of self-insurance seem to be talking about the same thing, they are actually quite different.
Deductible: Not all insurance policies offer coverage for first use. Some require the insured to pay a threshold amount for medical treatment and then, once that threshold is met, the insurance company will step in and begin paying an agreed-upon portion of the medical bills. This threshold is called a deductible. Medical treatment and medication copayments will also not kick in until you have met your policy’s deductible. With some health insurance plans, such as high deductible plans, the policyholder is permitted to open a health savings account which allows him a tax-efficient way to save money to pay his deductible.
Out-of-pocket maximum: Deductibles are paid out of the pocket of the policyholder. So are many other medical treatment costs such as copayments and co-insurance costs. Your policy’s out-of-pocket maximum is the maximum amount that you are expected to pay out of pocket for deductibles and co-insurance costs. Note that copayments (prescription or treatment related) and policy premiums do not count toward your out-of-pocket maximum.
A policy’s deductible and out-of-pocket maximum should be carefully considered along with its premium before the policy is purchased. A policy with a low premium that has a deductible you can’t hope to afford may not be the best choice for your family, no matter how attractive the premium is. Additionally, if the out-of-pocket maximum exceeds what you have saved, it could mean that you will have trouble handling your end of the medical expenses incurred under the policy. To get an idea of your true out-of-pocket cost for the policy, you can multiply the monthly premium by 12 and add in your out-of-pocket maximum. While this doesn’t include possible co-payments, it can give a good indication of whether or not a policy is right for your budget. Call us today to discuss your options for Virginia health insurance at (757) 583-1828.