The many fees associated with medical insurance can be confusing. Premiums are the fees paid for medical coverage for a specific benefit period. In addition to premiums, other out-of-pocket expenses include co-payments and deductibles, all of which vary with the insurance you have.
Medical Insurance Premiums
As with car insurance or home insurance, a medical insurance premium is the cost of getting the insurance. Unlike car or home insurance, however, if you get your medical insurance through your employer as a benefit, your employer usually pays some or all of the premium cost. As medical costs have increased, many employers have shifted more and more of the premium cost to their employees.
According to the Kaiser Family Foundation and the Health Research and Educational Trust, in 2009, premiums for employer-sponsored health insurance rose to $13,375 annually for family coverage. On average, employees paid $3,515 and employers paid $9,860.
Those exercising their COBRA rights to continue in their employer’s medical insurance plan after leaving their job must pay the full premium cost.
Those purchasing insurance in the marketplace must pay the full premium price, which is even higher because they are not in a group plan.
Co-payments are a form of medical cost sharing in which an insured person, in addition to premiums, pays a fee when she receives a medical service. The insurer pays the rest of the cost.
Sometimes the co-payment varies with the type of service. For example, a visit for a primary care visit may have a $15 to $20 co-payment, but a specialty service may have a $40 co-payment.
Often, those in managed care plans, or HMOs, are not required to make co-payments.
Most medical insurance plans limit the amount an insured person pays out-of-pocket during the benefit period, usually a year. There may be both individual and family deductibles. For example, you may have a $1,000-per-person deductible, but a $2,500 family deductible. This means you would pay up to $1,000 for your care in a benefit period, after which the insurance company would pay 100 percent, unless the total amount your family has paid in deductibles reaches $2,500 before that.
Some plans may have separate deductibles for specific services, such as hospitalization, which must be met for each admission. For example, a plan may have a hospitalization deductible per admission.
Public Medical Coverage
According to the Kaiser Family Foundation, approximately 100 million people have medical coverage through Medicare, Medicaid and the Children’s Health Insurance Plan, or CHIP. Premiums in these public programs differ from those in the private insurance market.
Medicare, which covers people over 65 and certain people with disabilities, does not require premiums for Part A, hospitalization, but does require premium payments for Part B, physician services, and Part D, prescription drugs.
Medicaid, which provides coverage to certain poor people, does not require premium payments.
Premium payments for CHIP vary by state. For most low-income children or very young children, no premiums are required. For families with higher incomes, premiums may be required on a sliding scale depending on income.