Be an actively engaged consumer of your health insurance.
When something goes awry with your health insurance, don’t expect the insurance company, your doctor or even your employer to fix it. Many of us drop the bill from the doctor’s office into a basket and prefer not to think about it because we don’t know where to start, or it’s too painful to delve into it.
Learn to look for the details
Paying attention to the little details can save you hundreds of dollars, or even more. Ask lots of questions early and often of your health care provider, insurance company or employer. Don’t make any assumptions. Read your plan documents.
Learn how to navigate the system.
Accessing your health insurance account online can help you in many simple, but significant ways: review your coverage; search for in-network providers; verify claims processed and what your expected out-of-pocket may be; research the cost of healthcare or prescriptions; request home delivery for a prescription; order replacement ID cards.
Keep a journal of your health insurance activity.
Do you keep track of your health insurance information, claims activity, payments made, follow-up calls? Get organized by dedicating a file folder and a notebook to track all of your health insurance activity. Write things down in the moment when they happen. Remembering which people you spoke to and commitments made down the road can be challenging to recall without a record to reference.
The maximum out-of-pocket limit is a health plan feature that limits the total financial responsibility you could have for health claims in a given calendar or plan year. Prior to the Affordable Care Act, this feature didn’t exist or wasn’t required as it is now. Thankfully, if we have a catastrophic or significant health episode requiring extensive health claims, our personal liability is limited. But do you know how to calculate your maximum out-of-pocket?
The maximum out-of-pocket typically tracks two major components of your health plan: Deductibles and co-insurance.
Health insurance plans define co-insurance as your share of the cost for a covered health care service, usually calculated as a percentage (like 20%) of the allowed amount or negotiated rate for the service.
Co-insurance it typically a financial feature of your health plan that comes into play after you’ve met your deductible. The deductible is the dollar amount of claims you are required to pay before the insurance company starts to make payments. Once the deductible is met, then you would pay your share (co-insurance) and insurance would pay its share.
Here’s an example of a large hospital claim to help illustrate how to calculate your out-of-pocket maximum:
Let’s say you were admitted to a hospital for several days and the total charge was $25,000. Based upon your health insurance plan design, you have a $3,000 deductible and a $3,000 maximum coinsurance limit (total of $6,000 out of pocket limit)
The claim would first be applied to your deductible.
Then the remaining amount would be what your coinsurance gets calculated against.
However, keep in mind that medical plans have a maximum out of pocket; your financial liability through the insurance plan is minimized if you have a catastrophic claim.
Once you meet your maximum out of pocket limit, the plan should pay 100%.
Deductible
$3,000 (you owe this)
$25,000 less $3,000 leaves $22,000
Co-insurance (20%)
$22,000 x 20% = $4,440; but your coinsurance maximum is $3,000.
Insurance plan pays 80% after the deductible is met.
Maximum Out-of-Pocket
$3,000 deductible plus $3,000 co-insurance limit = $6,000 what you would owe in total.
Insurance would pay $19,000 ($25,000 less your $6,000)
While this illustration is simplistic in its explanation, the basic calculation or methodology is accurate and can be applied if you have a series of claim submissions of smaller dollar amounts over the course of the calendar year. The outcome will be different if the claims are out-of-network because your medical plan could carry a separate/higher deductible and co-insurance limit for out-of-network claims.
Insider Note:Check to see if your In-network claims are counted towards your Out-of-Network out of pocket limits. Some plans may give you credit.
Keep in mind that the dollar amounts that get applied to your deductible and then used to calculate your co-insurance responsibility are based upon the insurance plan’s negotiated rate with an in-network provider. You are not responsible for the amounts above the negotiated rate when you receive treatment in-network. Insurance companies will still apply a reasonable / customary rate on an out-of-network basis which may be lower than the amount charged by the health care provider. In this case, you may be responsible for more money.
The good news is on a retrospective basis, your health plan will calculate your maximum out-of-pocket and publish your progress on the health plan portal / website where you can view your claims. The Explanation of Benefits (EOB) will also illustrate your progress. Prospectively, though, you may be more interested in knowing when you’ll hit the maximum out-of-pocket from a financial planning perspective. Therefore, it’s important to know how to at least estimate this maximum on your own. Nonetheless, mistakes can happen so it’s prudent to verify whether your health plan is processing your claims as expected. Contact your health plan if you have questions on how a claim was processed.
Maximize Your Health Insurance 