Insurance 101

How insurance works

Welcome to health insurance 101 – a world of premiums, co-pays, co insurance, and deductibles…
Say hi, to Fred, because he's about to help.  

Let's start with premiums. That's what Fred pays every month to have health insurance.  Fred, like half of all Americans, gets his insurance from work. So the cost of his premium comes out of his paycheck.
Fred used to have co-pays, a fixed amount for a service. Not long ago, that meant, every time he went to see his doc, he paid 30 bucks.

But now he, like many of us, has to pay a deductible first.  It's the amount patients pay before their insurance ever kicks in.  In his case, his deductible is $1,500.  So until his medical bills top that number, he pays every dime.
Which leads us to co-insurance. Once a patient hits a deductible, the insurance company may still want the patient to pay part of the bill.  In Fred's case, it's an 80 -20 split.  So once he hits his deductible, he's on the hook, for 20 cents of every dollar billed. That is, until he hits his out of pocket maximum, the most he will have to pay in any given year.  In his case, it's $3,000. Once he's paid that, insurance, picks up the rest.  That is until the next year, which this process starts all over again.


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