How To Estimate Your Health Insurance Cost-Sharing Expenses

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Estimating your annual health insurance cost-sharing expenses isn't this hard, but it's not child's play, either. Image ©Michael Blann/GettyImage

Are you trying to estimate your annual out-of-pocket health care expenses so you can budget appropriately? Are you trying to compare health insurance plans so you can pick the plan that save you the most money? Then you need to estimate your cost-sharing expenses like your deductible, copayments, and coinsurance.

Estimating your annual cost-sharing expenses isn’t a task for the faint of heart. There are two tricky parts.

First, to estimate your cost-sharing expenses you need a reasonable estimate of what types of health care services you’ll need and how much they’ll cost. Second, for any particular health plan, you need to figure out what counts toward the deductible and what doesn’t.

Estimating the Health Care Services You’ll Need

You can’t estimate your cost-sharing expenses if you don’t know what types of health care services you’ll need in the upcoming year. You’ll have to make an educated guess. Based on what you know about your health and how you’ve used health care services in the past, estimate how you’re likely to use health care services in the future.

Make a list of the health care services you’ll probably use in the upcoming year by asking yourself the following questions.

  • How many times per year am I going to see my primary care physician? Don’t include your annual physical exam or well woman visit if you have health insurance that complies with the Affordable Care Act; it will pay the full cost of preventive care services without any cost-sharing as long as you use an in-network provider.
  • How many times per year am I going to see a specialist physician? Again, don’t include your yearly well woman gynecological exam since this is preventive care and covered without cost-sharing.
  • How many generic prescriptions do I fill each year?
  • How many brand-name prescriptions do I fill each year?
  • Am I on a specialty drug?
  • Will I need other health care services during the year? Think of things like blood tests, X-rays, imaging studies, home health care visits, and physical therapy sessions. Only you know what you’ve needed in the past and what you’re likely to need in the future.
  • Will I need to use the emergency room? If you have health insurance and a primary care doctor, your chances of having to use the ER are decreased. But, only you know how delicate your health is or how accident and injury prone you are.

Calculating your Cost-Sharing Expenses: the Deductible

First, work on the health plan’s deductible. Understanding what, exactly, counts toward your deductible and what is exempt from your deductible can be confusing. For example, let’s say your health plan has a $500 deductible and requires a $30 copay for visiting your primary care physician. This can be handled in at least three different ways.

  1. In health plan A, this means you pay the full cost of visiting your PCP until you’ve met the full $500 deductible. After you’ve met the deductible, you only pay a $30 copay for visiting your PCP.
  1. In health plan B, this means you pay a $30 copay each time you see your PCP whether you’ve met your deductible or not. These copayments don’t count toward your deductible.
  2. In health plan C, like health plan B, this means you pay a $30 copay each time you see your PCP whether you’ve met your deductible or not. However, the copayments count toward your deductible.

Sometimes you can find this information in the health plan’s Summary of Benefits and Coverage, especially if you read the usage examples carefully. However, often it will require a phone call to the health plan.

Once you’ve determined what, exactly, counts toward your deductible, what doesn’t, and what services require the deductible to be paid before the health plan kicks in and begins to pay, you’ll need to work on estimating your copayment and coinsurance services.

How To Calculate Annual Copayment Expenses

It’s easy to calculate annual copayment expenses since they’re a fixed amount per episode of care. Let’s say you fill four generic prescriptions per year, and 2 brand-name prescriptions per year. Your health plan requires a $10 copay for generic prescriptions and a $40 copay for brand-name prescriptions. Your yearly generic prescription copayments will be $10 X 4 = $40. Your yearly brand-name prescription copayments will be $40 X 2 = $80. Your total estimated prescription drug copayments for the year will be $40 + $80 = $120.

To calculate your total annual copayment expenses for any particular health plan, repeat the above process for each type of health care service that requires a copayment. Then, add together the estimated copayment expenses for each of the different types of services. For example, calculate your expected copayments for physician office visits and add them to your expected copayments for prescription drugs.

How To Calculate Annual Coinsurance Expenses

Calculating coinsurance is more difficult. Because your coinsurance is a percentage of the cost of the service, in order to know how much you’ll owe, you have to know how much the service costs. Even more difficult, if you use an in-network provider to get the cheapest rates, you’ll get the health plan’s discount. Your coinsurance is a percentage of the discounted rate, not the standard rate.

Although it’s tough to accurately estimate the cost of the health care services you’ll owe coinsurance for, you can make a reasonable estimate by starting with “Find Out How Much Your Medical Care Should Cost.” It presents several online resources for looking up cost estimates for health care services in your area. First, plug the services you’re likely to use into one of the cost-estimators and come up with a generalized estimate of the cost of the health care services you’ll owe coinsurance for.

Once you’ve arrived at an estimate for the health care services you’ll owe coinsurance for, here’s how to calculate your expected coinsurance per year. Let’s say you’ll need 10 physical therapy sessions and you’ve estimated each session should cost about $75. The health plan you’re considering has a 30% coinsurance rate for physical therapy. Here’s how you’d estimate your annual physical therapy coinsurance expenses:

  • Calculate 30% of each $75 physical therapy session.
    0.30 X $75 = $22.50
    You’ll owe $22.50 coinsurance each time you see the physical therapist.
  • Multiply this by the number of times you’ll see the physical therapist each year.
    $22.50 X 10 = $225.00
    Your estimated annual coinsurance expenses for physical therapy with this health plan are $225.00.

Repeat the above process for each type of health care service that requires coinsurance. Be aware that, in some plans, each type of service has a different coinsurance rate. For example, a plan may require 30% coinsurance for emergency room visits but a 20% coinsurance for specialty drugs. Make sure you’re multiplying by the correct percentage for the type of service you’re working with. To get your total annual estimated coinsurance expenses, add together the annual expected coinsurance costs for each type of service.

Putting It All Together

To come up with an estimate of your total annual cost-sharing expenses, you can’t just add together your deductible, your copay expenses, and your coinsurance expenses. If you did this, your estimate would probably be too high.

First, start with your deductible. Many people don’t pay enough in cost-sharing expenses each year to meet their entire annual deductible. Only include what you think you’ll actually spend toward your deductible requirement. If you think your expenses will be high enough that you’ll satisfy the entire deductible, then add the entire deductible.  

Next, add the copayments and coinsurance that weren’t credited toward your deductible. If you add copayments and coinsurance expenses that were used to meet your deductible, you’ll be counting those expenses twice.

Lastly, check out your health plan’s out-of-pocket maximum. This is the annual maximum amount you’ll have to pay on cost-sharing expenses for in-network health care services. Once you’ve paid enough in deductibles, copayments, and coinsurance to have reached the out-of-pocket maximum, your health plan starts paying 100% of your covered health care expenses as long as you use an in-network provider.

If your total calculated cost-sharing estimate is larger than your health plan’s out-of-pocket maximum, it’s a safe bet to figure your cost-sharing expenses will be limited to your out-of-pocket maximum as long as you stick to in-network providers. If you use out-of-network providers, your expenses will be higher.

What Doesn't Count Toward Your Out-Of-Pocket Maximum?

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