New Year, New Deductible
Understanding Your Insurance Coverage
By Serena Moore
As we transition into the new year, many of us are setting goals to make our mental health a priority. These goals may include initiating mental health services for the first time or maintaining existing services. No matter what your goal is, we want to help you set you up for success by providing insight into the often mysterious world of insurance.
When it comes to insurance coverage, there are terms like premium, deductible, copay, coinsurance, and out-of-pocket max that are tossed around like sparks from sparklers on New Year’s Eve. All the information can feel overwhelming at times, but we hope the following explanations on each term helps provide you with a sense of peace and understanding.
Premiums
Many of us have subscriptions to streaming services in which we pay a monthly fee to have access to the platform. An insurance premium is the set monthly cost that you pay to have access to insurance coverage.
The insurance premium that you choose can influence how much you pay for mental health and health care services.
A low cost premium often comes with a high deductible, whereas a high cost premium may have a low deductible.
Deductibles
A deductible is the set amount that you have to pay out-of-pocket for services before insurance starts to pay.
One way to think about it is an ‘entrance fee’. Once you pay the cost of the entrance fee, then insurance will start paying. For example, if you have a $2,500 deductible, you will have to pay that amount before insurance will start paying for services.
You may still have small fees for services in the form of copays and coinsurance until you meet the out-of-pocket maximum.
Most—but not all—insurance deductibles start over on January 1st.
Some plans will cover certain mental health services or preventive care services.
This coverage information can be found by reviewing your insurance plan documents and summary of benefits, often available through your insurance portal.
You can also call the member services number on the back of your insurance card for detailed benefit information.
Copay, Coinsurance, and Allowed Rate
Copays and coinsurance are costs that you pay out of pocket in addition to your deductible.
Copays: A set cost that insurance determines you are responsible for paying at time of service. For example, you may pay $30 for every therapy session, and insurance will pay the rest.
Some plans may only require you to pay a copay, even if you haven’t met your deductible yet. The plan Summary of Benefits should detail this information.
Coinsurance: A percentage of the session cost that you are responsible for, usually once you have met your deductible. For example, the allowed rate* for a session is $135. You will pay 10% of the $135 which is $13.50.
*The allowed rate is the negotiated cost between your healthcare provider and the insurance company, which is often lower than the provider's billed amount. This is the rate upon which your out-of-pocket costs, such as coinsurance and costs towards deductible, are calculated.
It is important to understand that the insurance company's allowed rates significantly influence the overall cost of your insurance coverage.
Out-of-Pocket Maximum
The out-of-pocket max is the maximum amount that you will have to pay for services every year. Once it is met, then insurance will cover services at 100% for the remainder of the year.
What applies towards your out-of-pocket max?
Deductible costs
Copays
Coinsurance
If you believe that you may meet your deductible and out of pocket before the end of year, it is good to plan ahead and schedule additional services before everything restarts on January 1st. Just keep in mind that everyone else may be trying to do the same.
Take a Deep Breath and Dive Into Planning Mode
Verify your insurance coverage and benefits early so you have an idea how much you will have to pay out-of-pocket before your benefits kick in.
Give your provider’s office any updated insurance information and ask if they can provide you with a cost of services estimate.
If you have a high deductible plan, you may have access to a Health Savings Account (HSA).
Funding your HSA account early in the year can help cover initial costs and assist with budgeting.
Want more info on HSA accounts? Check out this article: https://www.fidelity.com/learning-center/smart-money/what-is-an-hsa
Your provider may be willing to work with you on a payment plan if costs are a concern while you are paying out of pocket for services. Plan to talk with them early on about your options.
Seek a financial advisor or a trusted and knowledgeable friend to assist with budgeting if it feels too overwhelming to tackle alone.
You are Worth It!
Insurance can be stressful and confusing, but it doesn’t have to be. Making it a priority to learn more about your insurance plan, and finances in general, can pay off in the long run. You will learn something new and be better prepared to invest in your mental health care! You are worth the time and money you dedicate to becoming the best version of yourself.
