Medical costs are generally astronomical, as they are, and sharing them becomes a necessity! Medical cost-sharing involves the insurance company and the clients where costs are distributed to the two parties depending on a certain formula. This innovation has relieved individuals from the burden of incurring medical expenses and ultimately improved its beneficiaries’ health.
Ways of sharing medical costs
In order to meet the diverse interests of its beneficiaries and favor them in a pocket-friendly manner, medical cost-sharing comes with several methods to pay. These methods include; co-payments, coinsurance, and deductibles. These are the three main avenues through which payment of medical costs is made.
However, in an effort to fully maximize service provision by the medical cost-sharing authorities, several adjustments have been made to the three main methods of sharing medical costs.
These adjustments involve merging the main methods to form a co-payment with coinsurance, co-payment with deductibles, and coinsurance with deductibles.
What is the out-of-pocket maximum?
To get acquainted with the three basic methods of sharing medical costs, one must be familiar with the concept; out-of-pocket maximum. This concept refers to the upper limit of pay that an individual is responsible for contributing to medical cost-sharing.
2014 was the year when this regulation took effect. This was influenced by the realization that medical cost-sharing was quite expensive since the health bills were skyrocketing. However, the out-of-pocket maximum was revised to $8,550 in 2021.
Coinsurance is usually a percentage of the total medical costs incurred. It is a medical cost-sharing method that is denoted as a fraction.
For example, a medical cost-sharing hat is denoted as 85/15, which means that the insurer caters for 85% of the costs while the remaining 15% is catered for by the insured.
Before coinsurance is paid, a deductible has to be met, which begs the question, what is a deductible?
Prior to a health plan covering one’s medical costs, the individual must pay an amount for certain services. This fee is known as a deductible.
Unlike coinsurance, deductibles are pre-determined and given to the insured as an actual figure. As of 2021, deductibles are set at an equal amount with an out-of-pocket maximum which is $8,550.
In medical cost-sharing, deductibles are mostly paid once. The exception occurs in cases where medical expenses and prescription expenses are categorized differently.
A co-pay is a predetermined amount paid as a fixed figure by the medical cost-sharing beneficiary. It is paid for medical services that are being covered by the plan. Depending on the frequency and essence of medical service, co-payments differ in terms of the fixed fee.
Co-payment is paid whenever the insured seeks the medical service and not once every year, like deductibles. These services include; doctor’s visits, prescriptions, and emergency room visits. Here is an example of how a deductible works;
If the consultation fee for seeing a doctor is $90, and the copayment is $30, the health plan will pay $60 while the individual pays $30.
The significant differences between copayments and deductibles are;
- Co-payments are paid whenever a medical service is sought, while deductibles are paid only once every year.
- Co-payments are valued at a lower cost compared to deductibles.
One should note that upon payment of copay, the health plan can go ahead and pay the balance of the medical bill irrespective of whether or not the deductible was made by the insured.
What are the benefits of medical cost-sharing?
1. Independence over the medical choices
Just like the name suggests, medical cost-sharing involves mutually covering healthcare costs. This is an advantage compared to insurance covers because the insured has complete control over the medical choices.
The health plan only contributes to reimbursement of the bill and ensures that an individual incurs little costs.
Quality medical care
With the competitive world around, medical plans try to offer the best to their clients in order to win the race. Furthermore, medical cost-sharing plans offer international service to members who benefit from the scheme. This improves the health well-being of the beneficiaries.
Premiums in insurance covers are wholly paid by the insured; this is not the case with medical cost-sharing. Here, the division of costs among the parties involved relieves the insured of a portion of the cost, which is a reasonable amount bearing in mind how expensive the health sector is.
Tip: to know whether a health care plan is insurance or a medical cost-sharing plan, ask whether they offer insurance or coverage. If the answer to the inquiry is yes, then it is not a medical cost-sharing plan.
Most folks try to avoid these technical terms, but after a little research on different companies and authorities, we felt it your right to understand them. All in all, medical cost-sharing plans are great compared to traditional insurance covers.