Beyond premiums and deductibles, a bigger potential expense
You know what your household spends each month for your health insurance premium. And you likely know how much you need to kick in — your annual deductible — to cover medical bills before insurance starts actually covering things.
But what about your maximum annual out-of-pocket expense (OOP) if you run into a serious illness or injury that requires expensive treatment? The OOP tends to be a bit out of sight, out of mind because it only comes into play when there is a serious injury or illness.
But given the high cost of OOPs, they are a potential cost that should be part of your overall financial plan.
The snowballing cost of copays and coinsurance
Your premium is the cost to have insurance. Your OOP is the maximum cost to use that insurance in a calendar year. Your OOP includes your deductible and any additional copays and coinsurance once you’ve met the deductible requirement.
According to the Kaiser Family Foundation (KFF), a nonpartisan healthcare research organization, the average annual deductible last year for single coverage ranged from around $1,200 to $2,300, depending on the type of plan. For family coverage, the deductible ranged from $2,700 to $4,550.
That’s already a steep demand on household cash flow if someone needs ongoing care or a battery of expensive tests, let alone hospitalization. But your premium and the deductible is not all that you might owe in a given year.
Most plans also charge copays for each visit to a doctor. According to the KFF, the average copay to see your primary doc was $26 in 2020. For a specialist, it was $42. That’s for each visit, for each person covered by your plan. If you need to see a specialist once a month for a year, that’s another $500 in copays right there.
Then there’s the coinsurance to contend with. If you need tests or treatment, coinsurance is the percentage of the bill you are required to pay. The average coinsurance rate last year for employer-provided plans was nearly 20%. On a $2,500 MRI cost, that means you’d be expected to cough up $500. For that one test.