(By – Matthew Rae, Larry Levitt, Gary Claxton, Cynthia Cox, Michelle Long, and Anthony Damico – Kaiser Family Foundation)
Private insurance plans typically require some form of cost sharing (also called out-of-pocket costs) when enrollees receive a health care service covered by their plan. These expenses, which are in addition to the amount an enrollee spends on his or her monthly premium, come in a variety of forms:
- Copayments: set dollar amounts for covered services (e.g. $20 per general physician visit);
- Coinsurance: a percentage of the allowed cost for covered services (e.g. 20% of the allowed cost for a specialist visit);
- Deductibles: set dollar amounts that enrollees must pay before their plan starts to cover the service or a group of services (e.g. $200 drug deductible before drug coverage begins);
- And, often, some combination thereof.
Insurers use cost sharing to keep down monthly premiums in a couple of ways. First, cost sharing can directly offset premiums by transferring some of the overall costs from monthly payments to payments at the time medical care is used. A second way cost sharing has a downward effect on premiums is by decreasing the amount of health care enrollees use: when a charge is required at the point of care, people tend to utilize fewer services. Read more…
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