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Copay, Deductible, Co-Insurance, Max out Pocket WHAT?!

Updated: Oct 4, 2018

With so many terms no wonder so many of us despise shopping for an insurance plan. Keep reading and I will attempt my best to decipher some of these terms into simpler forms.




Alright so we have a lot of terms in the insurance industry but in this post I want to discuss the most common ones. Copay, Deductible, Co-Insurance and Max out Pocket. Through the years of working with people I have realized that the easiest way to explain these terms are through illustrations and examples.


Let’s use Mark as an example





Copay

Copay is the amount of money your plan requires you to pay before you receive certain service or supply, Simple right, well how about an example. Mark gets sick and wants to go see a Dr. When mark arrives at the Dr office, Mark will then pay his $30 copay.


Deductible

A deductible is the amount of money you must first pay before your insurance kicks in. Let’s say Mark got into a car accident, after he left the hospital he noticed that the hospital bill is going to be $15,000. WOW that is a chunky bill, if he wants his insurance to kick in, he must first pay his deductible of $2,500. Now there is $12,500 left to pay. Does the insurance pay for that? Not quite, please move on to the Co-insurance.


Co-Insurance

Now we arrived to the co-insurance, this is where you and your insurance get to split the remainder of a bill. Using Mark as an example, Chad has already met his deductible but now he must split the rest of the bill 80/20. The insurance will pay 80% and Mark will pay 20%.

What part belongs to Mark, well 20% of $12,500 is $2,500. That means Mark will have to pay an additional $2,500 correct? Not really, this is where Max Pocket kicks in.


Max out Pocket

Max out of pocket as the name implies it’s the total amount of money that will come out of pocket with your Co-insurance. In Marks example he has a Max of $2,000 so he will only pay $2,000 not the full $2,500. The insurance will pay the absolute rest.

Let’s add all of this up.

$15,000 Initial bill

-$2,500 Deductible

-$2,000 Co-insurance (Max)

———————————

=$10,500 Will be paid by the insurance

Mark in this scenario only pays $4,500 for this crazy accident. Now the good news is that for the rest of the year Mark can have more accidents because he has met his Deductible and Max out of Pocket through his Co-Insurance. Next year his plan will reset and he will have the same amount amounts to pay in the event of any hospitalization.


Need to revaluate your health insurance plan? Is your deductible too high?

Click here and I would love to revaluate your situation.

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