An 80/20 insurance policy refers to a common co-insurance setup you might have through your employer's health insurance plan. Not all policies have a co-insurance component, but many employer group plans do. With co-insurance, your insurance pays a percentage of your health costs and you pay your portion.
Some people believe that premiums are the only common costs to a health insurance policy, but you could actually have three common types of service payments in your plan. Co-payments are fees, often $10 to $20, you pay for doctor's visits -- although emergency room visits usually have higher co-payment fees of $50 or more. Deductibles are amounts you pay before your insurance benefits kick-in. Co-insurance is your share of the bill for actual treatment costs, such as for surgery or facility fees, after your deductible is paid.
Assume you schedule an inpatient surgery for you, your spouse or a dependent. If your plan has a $250 deductible, you pay this amount of the bill first. Surgeries typically cost thousands of dollars, especially those involving inpatient stays. With an 80/20 policy, your insurance pays 80 percent of the remaining bill and you are responsible for the other 20 percent. If the total bill is $10,000, for instance, you pay $250 plus $1,950 in co-insurance, for a total of $2,200.
If you have recurring health issues, hospital stays and surgeries, your portion of the co-insurance can add up quickly. Most policies also have out-of-pocket maximums that limit the amount of money you have to put toward your health costs during a coverage year. You might have a $10,000 per person maximum and a $20,000 per family maximum, for instance. This means that your payments toward co-insurance stop at these thresholds and the insurer pays any remaining costs during the year. Along with co-insurance, your deductible payment is sometimes applied to your out-of-pocket maximum.
Picking the right type of policy structure can help minimize your health care costs. If you don't expect to use a lot of medical services, you can lower your premiums by taking on higher deductible amounts and higher out-of-pocket limits. If you do tend to use medical treatment regularly, you may be better off paying more in premiums to get lower deductibles and out-of-pocket maximums. If you are part of an employer group plan, your group health benefits committee usually negotiates terms with the insurer. You can share your feedback or participate in the committee to have more influence.
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