Insurance policies are cluttered with confusing terms that can have a large impact on what your insurance will and won’t do. It can especially be overwhelming for young people or those who haven’t had to shop in the marketplace previously due to getting insurance via their family or an employer.

What can make these terms more confusing for users is how each has the power to influence the others – for example, if you pay more for your premiums, you’ll have a lower deductible and copay, and vice versa.

If you believe you were misled by an insurance company or salesperson about what your plan would and wouldn’t do – or you believe you or your claims are being treated unfairly, you may want to consult with an insurance bad faith attorney. At Minnesota Lawyer Referral, we’ll connect you to a qualified insurance attorney who will break down the situation and explain your options.

What Is a Premium?

Premiums are the regular monthly or annual amount you pay to your insurance provider for your coverage – put simply, it’s the cost of having insurance. If your insurance plan is part of your work benefits, your premium is likely taken out of your paycheck, and your employer may pay part or all of it. Your premiums (including the employer-provided group plans) will be determined by your age and insurance history as well as the level and extent of coverage you’re receiving.

The Affordable Care Act has impacted how insurance companies design their premiums. Premiums now must be approved by Minnesota’s Department of Insurance to verify they’re based on fair and reasonable criteria. The ACA also incentivized insurance companies with subsidies to provide more affordable plans to low and middle-income individuals and make them more accessible through MNSure , Minnesota’s digital healthcare exchange marketplace.

The majority of people in the United States still receive insurance through employer-sponsored plans (about half), with the second largest group receiving coverage through Medicaid and the Children’s Health Insurance Program (CHIP) as well as Medicare. ACA Marketplace enrollment has gone up in recent years but is still low compared to alternative health insurance sources.

What Is a Deductible?

A deductible is a percentage of the total cost of provided healthcare services you must pay out of pocket at the start of your plan year before your insurance will start covering incurred medical expenses. How much you’ll have to pay depends on the specifics of your insurance plan, such as how much coverage you’re receiving and how high your premiums are.

For most plans, once you reach your deductible limit, the insurance company will cover a higher percentage of the cost. For example, if you have an 80/20 plan, you would only have to pay 20 percent of the cost and your insurance would pay 80 percent after you reach your deductible.

Even before you hit your deductible, your insurance provider will still negotiate on your behalf with healthcare providers and they may cover some preventative care costs, meaning you’ll pay less than you would with no coverage.

What Is Coinsurance?

Coinsurance is a percentage of the bill you owe for every medical service you receive after you reach your deductible. In other words, if a service is $5,000 and your coinsurance is 20 percent, you would only owe $1,000.

Policies typically have an out-of-pocket maximum in addition to a deductible and coinsurance. Once you hit the annual out-of-pocket limit, your health insurance provider will cover the entirety of costs for the remainder of the year. This is especially important for people who suffer catastrophic injuries or illnesses, like a serious car accident or cancer.

Deductibles, coinsurance and out-of-pocket maximums can prevent people from being buried in medical debt, but plans that offer lower deductibles or better coinsurance rates may have higher premiums.

What Are Copays?

Copays are flat fees you pay when you receive certain medical services, like going to the doctor or filling a prescription. These payments typically contribute to your out-of-pocket maximum. Unlike deductibles, which operate on percentages, copays are a set dollar amount.

Copays are typically minor, averaging around $30 to $50 (although the cost can vary depending on the plan and service). They are frequently applied to routine and preventive care. Predictable and affordable routine care incentivizes their use and enhances accessibility. Insurance companies want to encourage people to use those types of services since they can help prevent more serious ailments in the future, which means lower long-term costs.

The ACA requires compliant plans to cover the entirety of some preventative services if they are delivered by an in-network provider, such as cholesterol tests, immunizations and cancer screenings.

Minnesota Residents Can Gain Access to a Vast Network of Qualified Lawyers and Find an Experienced Lawyer Easier

At Minnesota Lawyer Referral and Information Service (MNLRIS), our referral counselors will connect you with a qualified Minneapolis–St. Paul attorney if you believe your insurance provider is acting in bad faith or you are embroiled in legal disputes regarding healthcare costs or services.

Call (612) 752-6699 to speak with a referral counselor.