Health insurance franchise: how it works, types

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A health insurance deductible is the amount you must pay to pay your medical bills before your insurance company can cover your expenses.

Deductibles can range from hundreds to thousands of dollars, depending on your insurance plan, and are generally renewed every year.

If your health insurance has one or more deductibles, you will have to pay for some of the services out of pocket. Once you have paid the full deductible amount, your insurance will split or pay the full cost of your treatment.

Franchise

The amount you pay for covered medical expenses before your insurance pays for services or drugs. Covered health care is any expense that is medically necessary and / or that may be required through a network of health care providers, depending on your plan.

How Health Insurance Deductions Work

Understanding what a deductible is, how it works, and when to pay it is part of using health insurance wisely.

Here is an example of expenses with a $ 1,000 annual deductible:

In January you will get bronchitis . You will see your doctor and get a prescription.

  • Total bill after your insurer's network discount = $ 200.
  • You pay $ 200.
  • Your health insurance pays $ 0.
  • $ 200 is credited to your deductible.
  • $ 800 left until deductible is met.

In April, he finds a lump in his chest . The lump is benign; You're healthy.

  • General Physician's Bill, Tests, and Biopsy = $ 4000.
  • You pay $ 800. (You have now met your $ 1,000 deductible).
  • You pay any copayments (set the dollar amounts you pay for each visit, such as $ 30 each time you visit a provider) or coinsurance (a percentage of the cost) that your health plan requires.
  • Your health insurance pays the rest of the bill.

Coinsurance

A fixed percentage that pays for medical expenses after the deductible is met. For example, if your coinsurance is 80/20, that means your insurance pays 80% and you pay 20% of the bill after you've met your annual deductible.

You will break your arm in September.

  • Total bill for ER visits, doctors, X-rays and cast = $ 2,500.
  • You pay copays and / or coinsurance if you have not yet reached your plan's cash limit. But you do not need to pay anything more towards the deductible, since you have already met it.
  • Insurance pays the entire bill minus copayments and coinsurance.

The cash limit is the highest amount you will have to pay annually and includes all deductibles, copays, and coinsurance you pay.

Once you reach your maximum out-of-pocket amount for the year, all payments, including copays and coinsurance, will also end; your insurer will cover all your medically necessary online costs by the end of the year.

In January of next year, it will start again. (Some plans do not follow the calendar year; in this case, your deductible and cash limit will reset at the end of the plan year or period.)

Each year, the health insurance plan establishes a new deductible and cash limit. Sometimes this is the same amount as a year before; sometimes it changes.

According to an analysis by the Kaiser Family Foundation, 83% of employees with employer-sponsored coverage had an annual deductible in 2020. The average annual deductible for individual insurance was $ 1,644.

There are some exceptions to the annual franchises. For example, the Medicare Part A hospital deductible is based on benefit periods rather than calendar years, so you may have to pay more than once in a calendar year.

However, the Medicare Part A benefit period begins when you are hospitalized and provides continuous coverage for your stay. Even if you are hospitalized in December and stay in the hospital in January, you will only pay the deductible once.

Summary

Every time you pay for health care covered by the health plan, it counts toward your deductible. Once you have met the deductible, the premiums are paid. If you reach the maximum out-of-pocket amount for the year, you will no longer have to pay copayments or coinsurance.

Other types of franchises

So far this article has covered the most common annual franchises. However, some health insurance plans have more than one type of deductible. They may include:

  • Prescription Deductible: Applies to prescription drugs in addition to the plan's deductible for other health care services. Once completed, coverage generally changes to copayment for lower tier prescriptions and coinsurance for higher priced prescriptions.

Drug levels

Drug tiers are levels of coverage based on the type of drug. Generally, there are four levels:

  • Tier 1 is the lowest tier, made up mostly of generic drugs , with the lowest cost and lowest copayments.
  • Tier 2 includes more expensive brand name drugs and generic drugs with average copays.
  • Tier 3 is a high tier of expensive brand name drugs with higher copays.
  • Tier 4 includes expensive specialty drugs with cost sharing that varies from plan to plan.

  • Franchise per episode: One franchise per episode occurs each time you receive a specific type of service. For example, your insurance may require a deductible each time you are hospitalized.
  • Out-of-Network Deduction – Some health plans, especially Preferred Provider Organizations (PPOs) , have an annual deduction for the care you receive from network doctors and a higher annual deduction for the care you receive from doctors off-grid to grid .
  • Family deductible: Deductible for all family members covered by a family insurance policy. Family plans can have built-in deductibles that include both individual and family deductibles, or they can function as a cumulative deductible , meaning that insurance is not paid until the full family deductible is met.

Let's say you have a family plan with a built-in deductible, your individual deductible is $ 1,500 and your family deductible is $ 3,000. Once you pay $ 1,500 for a family member's medical bills, insurance will start to pay for that person's additional bills. Once the $ 3,000 deductible is met among all family members, the insurance splits the costs.

If you have a family plan with a cumulative deductible, coverage won't pay until you reach $ 3,000, even if it's just for one family member.

Higher cash costs

The Affordable Care Act (ACA) requires health plans to limit a person's total out-of-pocket costs (for in-network services), known as maximum out-of-pocket costs, in a given year, even if that person is covered by a family plan that has a franchise family plan.

For 2021, the limit is $ 8,550 for personal expenses, including deductibles, copays, and coinsurance, and $ 17,100 for family plans.

In some health plans, any amount you pay outside of the network deduction also counts toward your in-network deductible. In other health plans, the two deductions are independent.

Some plans simply do not cover out-of-network services, which means that you will be responsible for the entire bill, with no cash limit, unless it is an emergency.

Summary

Your health plan may include deductions for prescription drugs, hospital care, or other specific services in addition to your annual deductible. If you are using a family plan, it can include an individual and family franchise, or just a family franchise.

Eligibility

If your employer offers health insurance, they may allow you to choose from several different deductible plans, or they may only offer one type of plan with a set deductible.

If you buy your own health insurance, you will be able to choose from all the plans offered in your area, and there will generally be several levels of deductible to choose from. Even in areas where only one insurer offers plans in a particular market, that insurer will have plans available with different deductibles.

If you have options, think about your health, the amount of savings you have (that you are willing and able to spend on health care), and the monthly premiums you will have to pay for the various health plans available. …

The monthly premium is the amount you pay each month for health insurance. This is separate from your deductible and any other costs, such as copays and coinsurance.

It is generally accepted that higher deductibles are better for healthy people and people without children, while lower deductibles work better for people with medical conditions and / or children. But it is not always that simple.

You also need to consider things like how much you will have to spend to buy each plan and whether you have enough money saved to pay your deductible if and when you need health care.

Calculate the numbers: Don't assume that a lower deductible is always the answer if you expect higher medical costs. In some cases, you may find that a plan with a higher deductible and lower premiums is actually the best solution for your situation.

If you expect very high medical costs throughout the year, the maximum amount of cash available, in addition to the monthly premiums, is more important than the deductible.

And even if you switch to Medicare, you have options: Medicare Advantage plans are available with various deductibles in almost every region in the country. Medicare Advantage means that you are choosing a private insurance company to get your Medicare benefits.

If you choose Original Medicare , which includes Part A hospital coverage and Part B health coverage , you can purchase a Medigap supplement that will cover part or all of your Medicare Part A deductible.

Coating

Even if your insurance has a deductible, there are certain preventive services that will be covered without you paying the deductible. It's also important to check your coverage and know what won't count toward your deductible.

When you don't pay the deductible

Under the US Affordable Care Act, you do not have to pay a deductible for certain preventive services with a network doctor as long as your health plan has not expired .

An outdated plan is a plan that was in effect before the Affordable Care Act was passed and can continue without following all of the ACA rules. If your employer has an outdated plan, you may have preventive maintenance costs.

Prophylaxis

Some of the preventive services covered by ACA include:

  • Breast cancer mammograms every two years for women age 50 and older, and as recommended by a healthcare professional for women age 40 to 49 or those at increased risk of breast cancer.
  • Rectal cancer screenings, such as a colonoscopy , when you turn 45.
  • Annual flu shot
  • Routine vaccinations according to age
  • Type 2 diabetes screening for people ages 40 to 70 who are overweight or obese
  • Cholesterol screening for high-risk or older people
  • Blood pressure test
  • Alcohol abuse screening and counseling
  • Detection of depression
  • Visits from healthy women
  • Screening for certain sexually transmitted infections (STIs), such as chlamydia , gonorrhea , hepatitis B, and syphilis, based on age, gender, and risk.
  • STI prevention counseling for high-risk adults
  • HIV screening

Some health plans, especially some employer sponsored health maintenance organizations (HMOs) , do not require a deductible. However, these plans generally charge copays for things like doctor visits, prescriptions, emergency room visits, and hospital stays.

What is not included in the franchise

Medical costs that are not covered by your health plan benefits do not count toward your deductible even if you paid them. For example, if your health insurance does not cover orthotics for your shoes, then the $ 400 you paid for a pair of orthotics prescribed by your orthopedist does not count toward your deductible.

Also, if your health plan does not cover out-of-network care, any amount you pay for out-of-network care will not count toward your deductible.

If your health insurance requires an episode deductible or deductible each time you receive a specific type of service, as well as an annual deductible, the money you pay toward the episode deductible may not count toward your annual deductible.

If you have separate in-network and out-of-network service charges, the amount you already paid for your in-network franchise does not count toward your out-of-network franchise. Depending on the rules of your health plan, the amount you paid for the out-of-network deduction probably won't count toward your in-network deductible either.

Most health plans don't count copays toward your annual deductible , although they do count toward your total out-of-pocket expenses for the year.

Summary

Annual deductibles are part of most health plans, and you will have to pay your covered medical expenses, excluding preventive care, out of pocket until you meet the deductible.

Get the word of drug information

Regardless of the health insurance plan you choose, you have to ask yourself how it will cover deductions if necessary. Even if you are perfectly healthy and have never needed more than prevention in the past, you never know when serious injury or illness may occur.

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