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HR Party of One is brought to you by BerniePortal.
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Deductibles, copays, coinsurance, out-of-pocket maximums…they can get confusing to your people.
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But—what role do you play in helping them understand the breakdown? Are you expected to?
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In this episode, I’ll go over the following: What Is a Copay?
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What Is a Deductible? What Is Coinsurance?
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What Is an Out-of-Pocket Maximum? An Example Using All Four, and
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Your Role as HR Let’s get started!
What Is a Copay?
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What Is a Copay? A copay is a fixed
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price that a health insurance plan establishes for different types of health services. Each
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type of health service can have a distinct copay value. For instance, a visit to your primary care
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doctor may have a $20 copay, whereas a visit to a walk-in-clinic may have a $50 copay. An individual
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on a copay insurance plan will know the price of each visit prior to stepping foot in office.
What Is a Deductible?
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What Is a Deductible? A deductible is a fixed
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dollar amount that an individual must pay toward medical expenses each plan
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year before their health insurance company will contribute. The percentage
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of their contribution after meeting their deductible will vary depending on the plan.
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For instance, let’s say your plan has an annual deductible of $3,000. You would have to pay
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$3,000 in medical expenses before your health insurance will assist with expenses. Meaning,
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you will be required to pay 100% of your services until you meet this amount.
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Services can include hospital visitations, surgeries, lab tests, MRI or CAT scans, etc.
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After the $3,000 deductible is met, the insurance company will begin to share the expenses,
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IF the service is in-network and covered by your insurance provider. If it’s an
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out-of-network service, then you will still be responsible for the full amount. If there are
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dependents on your insurance plan, there could be both individual and family deductibles. For
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more information about family deductible plans, check the article I linked below.
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After the deductible is met, some plans will split additional medical expenses with you 50/50. Some,
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80/20. Others will even cover 100% after the deductible is met. However,
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while one plan may appear better than another, keep in mind that a
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plan that may seem more favorable will likely have higher monthly premiums.
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There are also some services that will be covered prior to a deductible being met,
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such as certain types of preventative care, like an annual check-up.
What Is Coinsurance?
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What Is Coinsurance? Coinsurance is the amount
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that an individual will pay after meeting their deductible. This value will be a percentage
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of the total cost of care. For example, let’s say your insurance plan covers 80% of expenses
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after the deductible is met. You would then be required to only pay 20% of the costs,
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until you reach your out-of-pocket maximum, which is the total limit you’d have to pay
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within the plan year (I’ll explain more about that in a moment). All
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other costs that exceed that limit will be the responsibility of the health insurance company.
What Are Out-of-Pocket Maximums?
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What Are Out-of-Pocket Maximums? As I just mentioned, an out-of-pocket maximum is
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the MOST you’d have to pay within a plan year for healthcare services. This amount includes the sum
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of copays, deductibles, and coinsurance payments for in-network care. When you have spent up to
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the out-of-pocket maximum amount, your healthcare provider will pay 100% of your healthcare costs.
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However, your out-of-pocket maximum does not cover every single health care cost, so it’s important
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to understand what’s included and what isn’t. Let’s go over what is NOT included:
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Your insurance premiums. Money spent on services NOT
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covered within your health insurance plan Out-of-network services ; and ...
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Costs above the allowed amount for a service that a provider may charge
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What does this mean? Well—individuals still need to pay these fees even if they’ve reached their
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out of pocket maximum. For instance, if someone pays $2,000 for an elective surgery that is
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not covered by their insurance provider, then that amount will not count toward the maximum.
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Out-of-pocket maximums make it easier to budget the money put towards health each
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year, knowing that it won’t exceed an out-of-pocket maximum limit. However,
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people need to be careful when choosing services and ensure it’s included.
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Individuals can also be strategic with their insurance plan,
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enabling them to save a lot of money. Let’s say your plan year started in January,
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and you hit your out-of-pocket in September. You need to schedule a surgery to get your
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wisdom teeth out. Scheduling the appointment before the new year can save you thousands
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of dollars. Whereas, if you were to wait until January for the surgery,
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you’d likely wind up paying for the entire surgery, or a large portion of it.
An Example Using the Terms
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Example Using Deductibles, Copay, Coinsurance, and Out-of-Pocket Maximums
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Let’s say your health insurance plan consists of a $2,500 deductible,
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$50 copays, 50/50 coinsurance, and a maximum out-of-pocket limit of $5,000.
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You have your annual check-up with your primary care; this service is free as
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it’s a preventative service. During your check-up,
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you mention that you’ve been experiencing some pain when you swallow, so your doctor
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refers you to an ear, nose, and throat specialist (where you pay a copay of $50).
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During that visit, the specialist reviews your symptoms and physical ailments and
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diagnoses you with tonsillitis. The doctor decides that your case
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requires surgery, and schedules you for a tonsillectomy, which costs $8,000.
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Let’s say that you have not yet paid anything toward your deductible. The first $2,500 is
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completely out of pocket. Then, coinsurance kicks in, and you are required to pay 50% of
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the additional costs, NOT exceeding $5,000 out of your own pocket.
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Here is the breakdown: The Deductible (paid by you): $2,500
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Additional costs: $5,500 Coinsurance(50/50): $2,500 (paid by you)
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$2,500 (paid by insurance company) Note that the Out-of-pocket maximum is now hit.
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$2,500 deductible + $2,500 (50/50 coinsurance plan) = $5,000 (maximum out-of-pocket)
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The Remaining costs after out-of-pocket maximum is hit: $500
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The insurance company will then pay the remaining $500. For the remainder of the
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plan year, you will not need to pay for any more health service expenses.
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You would only be required to pay for a service if
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it falls into the NOT included list that I mentioned earlier.
Your Role as HR
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Your Role as HR When it comes to health insurance benefits,
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your priority as HR is choosing the right benefits broker for your organization. If you’re at a
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startup and need some guidance with this process, I’ve linked a blog for you in the description.
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Once you have a plan for your org, you can use a benefits administration feature,
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like BerniePortal’s to host plan documents, including summary plan descriptions,
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so that employees can review the information of each plan offering to make the most informed
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decision for themselves and their dependents. These summaries will include explanations on
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deductibles, copays, coinsurance, and out-of-pocket maximums. You can
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even add links to resources and videos to help educate employees on their benefits.
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If employees have questions regarding any of their benefits or if they need
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assistance choosing a plan, you can direct them to your benefits broker. You can
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include the broker’s contact information within the ben admin feature as well.
Final Thoughts
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Your role isn’t to help people elect their benefits or to help them understand the
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difference between deductibles and copays. (Though, you can send them this HR Party
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of One episode to help them out!) You aren’t the insurance expert, so don’t stress about
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needing to answer anyone’s questions. Just simply direct them to your broker and move
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on to the tasks that DO require your attention. Remember—your role is as strategic as you make it!
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That’s it for this episode! Subscribe to our channel and ring the bell to
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get notifications about our newest episodes,
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which are released every Tuesday and Thursday! As always, thanks for watching.
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