Most health insurance plans do not provide a blank check for medical services. You usually need to pay some portion of your medical costs. This keeps the monthly premium costs of insurance lower and stops people from overusing medical care. One way insurance companies divide costs is through co-insurance plans such as an 80/20 medical plan. In this type of plan, you must first meet your annual deductible. Once you do, your insurance will pay for 80 percent of your health care while you will pay the remaining 20 percent.
If you have an 80/20 medical plan, then after you meet your annual deductible, your insurance company pays for 80 percent of health costs while you pay 20 percent. This arrangement is known as co-insurance and is in addition to your regular monthly insurance premium.
What Is Co-insurance?
Co-insurance is a type of cost-sharing plan between you and your insurance company. You need to pay a certain percentage of your health care costs, and the insurance company pays the rest. The plan formula is usually listed in the name of the plan so customers can easily figure out how much they need to pay.
The first number represents the amount your insurance company will pay, while the second number is the amount you will pay. For an 80/20 plan, your insurance company will pay for 80 percent of your care, and you'll be on the hook for the other 20 percent.
How Payment Works
An 80/20 plan splits up your bill immediately after treatment. When a doctor or hospital administrator sees your card, he will know to send 80 percent of the costs to your insurance company and leave you with the remaining bill. For example, if your doctor charges you for $1,000 worth of care, your insurance company will pay for $800 of the treatment, and you will need to cover the remaining $200. This means you'll still have to pay a sizable amount of your health care bills, but you get a big discount compared to someone with no insurance.
Other Insurance Costs
When you enroll in an 80/20 plan, you'll have other costs on top of your 20 percent share of medical bills. To purchase medical insurance, you need to pay a monthly premium to your insurance company. This money only keeps your insurance active and does not go toward paying your medical expenses.
Your plan might also charge a deductible for the year. A deductible is the amount you need to pay completely on your own for health care before your insurance kicks in. If your plan has a $2,000 deductible, you'll need to pay all of your first $2,000 in expenses before the 80/20 split comes into play.
Understanding Plan Limits
In the past, your 80/20 plan and others could place a lifetime limit on health care spending for major expenses. One type of limit still in effect is your co-insurance ceiling. If your bills go over the coinsurance maximum limit for the year, your insurance company will start paying 100 percent of your costs for the rest of the year.
The Affordable Care Act (ACA), however, makes it illegal for your insurance company to set limits on the amount of money that they will pay over your lifetime. Your insurer can place limits on how much they pay for non-essential health care, but they cannot deny payment for essential care. Any limits appear in your insurance policy documentation.