From 2011 until now, employer-based healthcare premiums rose a staggering 20 percent.
This increase is getting people more involved and wanting to learn more about their healthcare options than ever before. Specifically, people want to know, “what’s the deal with deductible vs out of pocket charges?”
We are going to dive in and dissect these definitions. By the time we finish you are going to know the basics of deductibles and how they work. We are also going to cover everything you need to know about out of pocket payments and what they mean to you.
Let’s dive in and take a closer look at these definitions!
I Owe What?
First, we are going to talk about deductibles. To understand this term, we are going to start with a baseline number for reference. Assuming you find an insurance company, we will use an insurance deductible amount of $1,500.
Let’s say you go to the doctor because you stubbed your toe. The nurse figures out what is wrong and you end up getting a prescription for over the counter pain medicine and the healthcare experience. The total cost is $800.
Since your deductible is $1500, you are going to be held responsible for the complete 800 dollar bill. You must pay your medical bills up to your deductible total in one year. Let’s say after your $800 bill you need to go back to the hospital for urgent care services the following month and once again your bill comes out to 800 dollars.
You need to pay the full $1500, and the last $100 ($800 + $ 800 = $1600 – $1500 deductible) officially falls into your “out of pocket” costs.
Now How Much?
You may be feeling overwhelmed knowing that you could pay over 1000 dollars and are still wondering — “what’s the bottom line when it comes to deductible vs out of pocket payments?”
Let’s jump back to the previous example and say that there is a 100 dollars leftover. How much of that do YOU have to pay back? Well, the answer can vary depending on your plan. The average out of pocket percentage is 20%.
If your out of pocket cost is 20 percent, that means you will pay 20 percent of the cost after your deductible. You would take that remaining 100 dollar balance from the last example, and it would come down to you paying 20 dollars. The insurance would cover the other 80 dollars.
You can rest easy knowing that there is an out of pocket maximum. In other words, once you reach that max number the insurance will pay 100% of your medical costs.
Let’s wrap it up and put a bow on it for the conclusion.
Conclusion: Deductible Vs Out of Pocket Costs
Now you should have a good grasp on how deductibles and out of pocket costs work.
Essentially, you need to pay your deductible before you can take advantage of the discount that comes with your out of pocket cost. Once you reach that out of pocket cost, another number comes into play, your out of pocket maximum.
After your max out of pocket cost is reached you will no longer pay a percentage of your healthcare costs. The insurance company will cover you 100%.
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