Understanding Your Health Insurance: What Do Deductibles, Copays, and Coinsurance Mean?

Have you ever looked at your health insurance information and felt confused?

You're not alone!

You pay for health insurance every month. Then you go to the doctor or schedule occupational therapy and find out you may still owe money.

How does that work?

Words like deductible, copay, coinsurance, and out-of-pocket maximum can make insurance hard to understand.

The good news? You don't have to be an insurance expert to understand the basics.

Let's break down these common health insurance terms so you can feel more confident about your coverage and what you may have to pay.

What Is a Health Insurance Premium?

Let's start with something most people are familiar with.

Your premium is the amount you pay each month to keep your health insurance.

Think of it like your monthly phone bill. You pay to keep your service active.

But here's where insurance gets confusing.

Paying your monthly premium does not mean all your medical visits are free.

You may still have to pay a deductible, copay, or coinsurance when you receive care.

What Is a Deductible?

A deductible is the amount you pay for certain covered medical services before your insurance starts paying its share.

For example:

Let's say your insurance has a $1,000 deductible.

You haven't paid anything toward it yet.

You visit a therapist, and the insurance-approved cost of your visit is $100.

You may have to pay that $100 yourself.

That payment counts toward your deductible.

Once you've paid $1,000 toward your deductible, your insurance may begin paying a larger share of your medical costs.

Here's something important to remember: Not every medical service requires you to meet your deductible first.

Some insurance plans cover certain visits with just a copay.

Most deductibles also reset at the start of each new plan year.

What Is a Copay?

A copay is a set dollar amount you pay for a covered medical visit.

For example:

Your insurance may have a $25 copay for occupational therapy.

That means you pay $25 for each covered visit when that copay applies.

Your insurance pays the remaining approved amount based on your plan.

Copays may be different for each type of medical care.

You might pay $20 to see your family doctor but $40 to see a specialist.

Some plans require you to meet your deductible before a copay applies.

Always check your specific benefits.

What Is a Coinsurance?

Coinsurance is the percentage of a covered medical cost that you must pay.

Unlike a copay, coinsurance is not a set dollar amount.

Here's an easy example.

Your insurance pays 80%, and you pay 20%.

If the insurance-approved cost of occupational therapy is $100:

• Your insurance pays $80.
• You pay $20.

If the approved cost is $150:

• Your insurance pays $120.
• You pay $30.

This example assumes you've already met your deductible and no other payment rules apply.

Remember: Insurance companies use an approved amount to figure out payment. This may be different from what your provider originally billed.

What Is an Out-of-Pocket Maximum?

Your out-of-pocket maximum is the most you'll have to pay during your plan year for covered services that count toward that limit.

It usually includes your deductible, copays, and coinsurance.

Let's say your plan has a $4,000 out-of-pocket maximum.

Throughout the year, you visit doctors, receive tests, and attend occupational therapy.

Once you've paid $4,000 in costs that count toward your limit, your insurance generally pays 100% of covered in-network care for the rest of that plan year.

However, your monthly premiums, services not covered by insurance, and some out-of-network costs do not count toward this limit.

Original Medicare has different rules and does not have the same yearly out-of-pocket limit for Part A and Part B services.

What Does In-Network and Out-of-Network Mean?

An in-network provider has an agreement with your insurance company about payment for services.

An out-of-network provider does not have that agreement with your specific plan.

Does this mean you cannot see an out-of-network therapist?

Not necessarily!

Many insurance plans include out-of-network benefits.

This means your insurance may still help pay for occupational therapy even if the therapist is not in your network.

However, you may have a higher deductible or pay a larger share of the cost.

You may also owe charges above the amount your insurance approves, depending on your plan and the rules that apply.

Some insurance plans do not cover out-of-network care at all, except in certain situations.

That's why checking your benefits before scheduling is so important.

Does Medicare Cover Occupational Therapy?

Yes!

Original Medicare Part B covers medically necessary outpatient occupational therapy when Medicare's requirements are met.

After you meet your yearly Part B deductible, you generally pay 20% of the Medicare-approved amount.

For example, if Medicare approves $100 for a covered occupational therapy visit:

• Medicare pays $80.
• You are responsible for $20.

If you have Medicare Supplement insurance, also called Medigap, or another secondary insurance plan, it may help pay some or all of that remaining amount.

Medicare Advantage plans work differently. They may have their own copays, networks, and approval rules.

Learn more about occupational therapy coverage through Medicare.

How Can I Find Out What My Insurance Will Pay for Occupational Therapy?

One of the best things you can do is check your benefits before starting occupational therapy.

Call the member services number on the back of your insurance card.

Here are some helpful questions to ask:

1. Does my insurance cover outpatient occupational therapy?
2. Is my therapist in-network?
3. Do I have a deductible, and how much have I met?
4. Do I have a copay or coinsurance for occupational therapy?
5. Do I need a referral or prior authorization?
6. Is there a limit on my occupational therapy visits?
7. How much have I paid toward my out-of-pocket maximum?

Keep in mind that checking benefits does not guarantee payment. Your insurance company makes its final payment decision after reviewing the claim.

Understanding Your Insurance Can Help You Plan for Care

Health insurance can be confusing, but learning a few basic terms can make a big difference.

At Functional Living Solutions Occupational Therapy, we understand that patients want to know what their care may cost before beginning treatment.

Whether you need occupational therapy after surgery, help with arthritis, stroke recovery, or support with everyday activities, understanding your coverage can help you plan ahead.

We encourage you to ask questions about your benefits and possible costs.

Our goal is to help you make informed choices about your care.

Function is what we do. Living is why we do it.

Frequently Asked Questions About Health Insurance