Oct 29, 2020

What options do I have to control the costs of health insurance?

Health insurance plans are difficult to understand. Catch makes it easy.

Why are some plans more expensive?

It can be really difficult to understand why some health insurance plans are more expensive than others. When each plan has different coverage amounts, it can be difficult to compare policies side by side.

Differences in the monthly cost of a health insurance plan comes down to how much financial risk is shared by the insurance company. 

Health insurance plans differ in their known costs to you and their unknown costs to you. 

Examples of known costs are what monthly premium you pay, or how much your copayment is when you visit the doctor. 

Unknown costs have to do with your use of your health insurance. How often will you need to see a doctor? Will you need to see a specialist or receive emergency care? 

Generally, plans with higher known costs (like your monthly premium) will have lower costs when you use your plan in the event of an emergency or health event. In effect, you’re paying more up front for the peace of mind that medical bills will be relatively affordable if you need care in the future.

Plans with lower monthly premiums will be more expensive to use when you need them down the road. 

This can make it difficult to pick the right plan for you. It’s all about balancing what you can afford in known costs, with how much you’re willing to pay when you need to receive healthcare.

What options impact cost the most?

Okay, so what plan options should you be looking at when picking a plan? These are the options that impact the cost of health insurance the most:

  1. Monthly Premium
  2. Deductible
  3. Copayment or Copay
  4. Co-insurance
  5. Max out-of-pocket cost

Let’s go through each one to see how they impact the cost of insurance:

Monthly Premium - This is the cost that most people are familiar with. It is the monthly amount that you have to pay to have health insurance. It’s a fixed, known cost that’s consistent every month. Think of it as the subscription fee you pay to maintain your health insurance.

When comparing health plans, you should try to pick a plan with a monthly cost that you can reasonably afford. However, often the lower the monthly premium cost, the higher the unknown costs you will pay when you use your plan. 

Copayment or Copay

This is the amount you owe each time you receive certain medical care or purchase certain medical equipment or drugs. This is a known cost everytime you receive medical care. While you may not know exactly how often you will need medical care, you will know what it costs each time.

Generally, the lower your monthly premium, the higher the copay due for care and services.. Pay less each month, but pay slightly more each time you need care.

Deductible - This is a set amount of money that you need to pay out-of-pocket before your health insurance will kick in and start paying. It’s a fixed amount that does not change throughout the year. When comparing health plans, you should try to pick a plan with a deductible amount that is reasonable based on your current financial situation. In a worst-case scenario, you could be responsible for paying your entire deductible (or more) on a single medical bill. 

Generally, the lower your monthly premium, the higher your deductible.Pay less each month, but risk spending more out of pocket if you need serious care.

Co-Insurance - After your deductible amount has been met for the year, your insurance will start paying for a portion of your medical expenses. However, some part of your medical bills are still your responsibility. This amount is what's known as your Co-Insurance amount.

Generally, the lower your monthly premium, the higher your co-insurance rate.Pay less each month, but continue paying more out of pocket for care, even after reaching your deductible.

Max-Out-Of-Pocket Cost - What happens if you end up getting a really big medical bill?Your max-out-of-pocket amount is the total amount you have to pay out of pocket before your insurance pays for 100% of your medical expenses. It’s basically a cap on the amount you’d ever be responsible for paying in a given year. This is usually only met in the event of a truly catastrophic medical bill.

Generally, the lower your monthly premium, the higher your out-of-pocket max. Pay less each month, but pay much more in the event of a serious medical emergency. 


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