Have you ever wondered what the difference is between a deductible and co-insurance, or cost share and co-insurance? These terms can sometimes be confusing and we want to provide you with a better understanding of the different terms that may apply to group health and/or dental benefits.
Premium: The monthly amount the employer pays for the company’s health and/or dental coverage.
Cost Share: The amount the employee pays their employer towards the cost of their health and/or dental coverage. For example, if the health plan has a 25% cost share, then the employee would pay 25% toward the cost of the premium and the employer would pay 75%. Typically, this is deducted directly through payroll deductions.
Deductible: A dollar threshold of health and/or dental costs the insured individual needs to meet before the any co-insurance is applied. For example, if the health plan has a $100 annual deductible, then the insured must pay this amount before claims are paid through the plan.
Co-insurance: After the insured meets any deductible requirement, the insurer covers a pre-determined percentage of eligible health and/or dental claims with the balance being paid by the insured. For example, if the health plan has an 80% co-insurance, then the plan will pay 80% of the cost of eligible claims and the insured would pay the remaining 20%. This encourages employees to be smart consumers as they incur out-of-pocket expenses otherwise.
Out-of-Pocket Maximum: Typically, found in some health plans. This is the maximum amount the plan member would be required to pay in a plan year. Once the insured reaches this limit, the insurer pays for all other eligible expenses. For example, if the health plan has a $1,000 out-of-pocket maximum, then this would be the maximum out-of-pocket expense the employee would have to be pay in any plan year subject to benefit limits and adjudication practices.