What is Traditional Health Insurance?
A traditional health insurance plan operates on the system of copayments (also called copays) and coinsurance. When enrolled in a traditional health insurance plan, you will be responsible for paying a monthly premium for the coverage. In addition, you will pay a copay for every doctor visit, as well as slightly higher copays as trips to the hospital and emergency room. The copays are a set amount but are usually higher when you see a specialist or go to the emergency room.
You may also be required to pay coinsurance on certain medical expenses, such as tests or hospital stays. Coinsurance is the percentage of the bill that you are responsible for paying, in addition to the copayment for the procedure. For example, if you have 80/20 coinsurance, the insurance company will pay 80% of the cost and you will be responsible for the other 20%. Coinsurance applies after you have reached any deductible set by your insurance policy.
There are several different types of health insurance plans. An employer-sponsored plan, where you would buy insurance through your employer; a self-employed plan, where you would buy individual health insurance from a company or the state; health insurance via COBRA if you are unemployed; and finally, being self-insured.
Choosing a health insurance plan is another key factor in the process. Don't just spring for the cheapest plan you can find; oftentimes, this can end up costing you more in the long run in copays and coinsurance. Be sure to do your research and choose the plan that's best for you; for example, if you are relatively healthy and only visit the doctor once a year, a plan with a lower premium and higher copay or deductible may be right for you. However, if you have a health condition that requires you to visit the doctor often, or are simply more accident-prone, you may want to up your coverage.
(Also be sure to do your research on preexisting conditions when shopping for a health insurance policy.)
Many health insurance policies have a maximum out-of-pocket payment limit. Once you reach this limit, the coinsurance no longer applies, although you do need to continue to pay your copayments. This is why it’s important to carefully read all your doctor’s bills and insurance statements, to be sure that both your bills and paid and that you are not overcharged.
It is important to understand how much a procedure could cost you. For example, if you had to undergo surgery and stay overnight, you would have to pay your hospital copayment amount, pay the deductible amount if you have not already met it, and then pay your coinsurance amount on the remaining balance of the hospital bill.
If you’re not sure how your insurance policy works, call and talk to a representative at your insurance agency to learn the estimated costs of the procedures beforehand, so you can put aside the money. Planning ahead and doing research before any major medical procedures or tests could potentially save you a lot of money in the long run.
You should also make sure that you get pre-approval for any tests and surgeries before you have them done since they can be costly to pay for out-of-pocket. This can save you money since the insurance agrees to cover the cost. You will also want to make sure that all doctors and anesthesiologist that will be working on you are within your network, too. If you stay within your network, you will pay much less, since the health insurance has worked out lower costs deals with those doctors
One of the benefits of a traditional health insurance plan is that it is fairly easy to predict your costs. This type of plan also does not require you to pay as much up front. This may be a good option if a high deductible health plan (and an HSA) seems daunting to you, and you would avoid seeing your doctor because of it.
However, some people do prefer a high-deductible plan because once they meet the deductible, then they no longer need to cover any additional medical expenses. If you know that you will always meet your deductible, you may want to consider that option instead of traditional health insurance.
Updated by Rachel Morgan Cautero.