A traditional health insurance plan operates on the system of copayments (also called copays) and coinsurance. Here’s how a traditional health insurance plan works, what you’ll be responsible for paying for, the different types of traditional health insurance, and a few pointers to keep in mind.
How It Works
When enrolled in a traditional health insurance plan, you will be responsible for paying your premium, which is the monthly cost of your healthcare plan. 1 You’ll also pay a copay for every doctor visit, which is a fixed payment you’ll pay to receive services, such as visiting the doctor or a specialist. 2
The amount of your copay will differ depending on the service. For example, your copay when visiting your general practitioner will likely be lower than your copay when you visit a specialist or the emergency room.
You may also be required to pay coinsurance on certain medical expenses, such as tests or hospital stays. Coinsurance is the percentage of the bill that you are responsible for paying, in addition to the copayment for the procedure. For example, if you have 80/20 coinsurance, the insurance company will pay 80% of the cost and you will be responsible for the other 20%. 3Coinsurance applies after you have reached any deductible set by your insurance policy.
Types of Health Insurance
There are several different types of health insurance plans. An employer-sponsored plan, where you would buy insurance through your employer; a self-employed plan, where you would buy individual health insurance from a company or the state; health insurance via COBRA if you are unemployed; and finally, being self-insured.
Choosing a Plan
Choosing a health insurance plan is another key factor in the process. Don’t just spring for the cheapest plan you can find. Oftentimes, this can end up costing you more in the long run in copays and coinsurance.
Be sure to do your research and choose the plan that’s best for you; for example, if you are relatively healthy and only visit the doctor once a year, a plan with a lower premium and higher copay or deductible may be right for you.
However, if you have a health condition that requires you to visit the doctor often, or are simply more accident-prone, you may want to up your coverage. Also, be sure to do your research on preexisting conditions when shopping for a health insurance policy, though denying coverage based on preexisting conditions is now prohibited by law, with the exception of grandfathered plans. 4
Many health insurance policies have a maximum out-of-pocket payment limit. Once you reach this limit, the coinsurance no longer applies, though you do need to still pay your monthly premiums. 5
It is important to understand how much a procedure could cost you. For example, if you had to undergo surgery and stay overnight, you would have to pay your hospital copayment amount, your deductible if you have not already met it, and then pay your coinsurance amount on the remaining balance.
If you’re not sure how your insurance policy works, call and talk to a representative at your insurance agency to learn the estimated costs of the procedures beforehand, so you can budget for this cost. Planning ahead and doing research before any major medical procedures or tests could potentially save you a lot of money in the long run.
Make sure that you get pre-approval for any tests and surgeries beforehand since they can be costly to pay for out-of-pocket. Also, confirm that your doctor and other specialists are in-network for your plan.
The Bottom Line
One of the benefits of a traditional health insurance plan is that it is fairly easy to predict your costs. This type of plan also does not require you to pay as much upfront. This may be a good option if a high deductible health plan (and an HSA) seems daunting to you, and you would avoid seeing your doctor because of it.
However, some people do prefer a high-deductible plan because once they meet the deductible, then they no longer need to cover any additional medical expenses. If you know that you will always meet your deductible, you may want to consider that option instead of traditional health insurance.