If you are not familiar with health insurance then the costs involved in a health insurance plan could appear to be somewhat complicated and many people are surprised that, after they have paid what seems like a small fortune, they find themselves faced with a bill the very first time they submit a claim. Before you are landed with an enormous medical bill therefore, it might be a good idea to take a moment to learn just what sort of costs you should expect to incur on your health insurance plan.



The first and most obvious cost is the monthly premium or, if you so choose, the quarterly premium or annual premium. If you belong to an employer's or union group insurance plan then you will normally be required to meet only a percentage of the premium and this will normally be deducted from your pay check.

Most health insurance policies also include an annual deductible which is a sum of money which you will be required to pay before the insurance company begins paying out on any claims. So, with an annual deductible of say $1,000 you will have to pay the first $1,000 of any medical bills each year before the insurance company will start paying out. You may be familiar with the principle of paying a deductible from your experience with car insurance policies and, if so, will also know that the higher the deductible on your policy the lower your premiums will be. Also, if you have a family health insurance plan then this will frequently include multiple deductibles for the individual members covered under the policy.

Most health insurance policies will also include a co-payment which is a fixed sum of money which you will have to pay towards each medical bill. Just how much you will have to pay in co-payments will depend largely on the type of policy which you hold. For instance, co-payments on HMO plans are frequently less than those on indemnity plans. In addition, the co-payment will also vary between different forms of medical service and, if you have an HMO plan, will normally be higher if you are treated outside of the HMO network.

In those cases where a co-payment is not required you will generally find that this is replaced by co-insurance which is very similar and is a sum of money, this time expressed as a percentage, which you will again need to pay towards each medical bill. A common co-insurance ratio is 80/20 indicating that the insurance company will pay 80% of each medical bill while you pay 20%. As in the case of co-payments, co-insurance will normally increase if, as an HMO plan holder, you are treated outside of the HMO's network. In this event you will also find that, whenever a claim exceeds what is considered by the insurance company to be 'reasonable and customary', you might be required to meet the additional cost.

By now you will realize that comparing health insurance plans is about a great deal more than simply comparing plan premiums. As a consequence, it is vitally important for you to read the small print of any quote very carefully and avoid the common temptation to simply choose the plan with the smallest monthly premium.

If you want to keep costs low and are in an HMO plan then you should attempt to remain inside the HMO's network and, where you do feel the need to go outside the HMO's network, then compare actual treatment costs to what your insurer considers 'reasonable and customary' before you agree to treatment.

It is also possible to keep your costs down on most plans by raising or lowering the deductible and by opting for higher or lower co-insurance. Precisely how this can be achieved is beyond the scope of this particular article but is a matter of balancing the various different costs involved against the probability of having to make a claim on the policy.