Private Insurance Company

Each insurance company and plan has different standards regarding what they will and will not cover and how much they will pay. Typically, like Medicare, they will require that you pay a deductible or a co-payment. After you pay your deductible, then they typically pay a certain percentage of your costs, called co-insurance. Often there is a maximum out of pocket expense.

Definition of terms

Deductible - The annual amount of health care services expenses which must be incurred and paid by the individual before a third party will assume liability for payment of benefits. In other words, you usually have to pay from $500 to $1000 out of pocket before your insurance kicks in.

Co-Payment - A predetermined, fixed amount charged by the health care benefit plan which the individual is required to pay for covered services, generally paid to the provider at the time services are rendered. (usually around $20 a visit - this does not apply to out-of-pocket or deductible expenses.

Co-Insurance - In many plans, the insurance company pays a certain percentage of costs after you have met your deductible. Usually that percentage is 80%, you pay the other 20% - that is the co-insurance.

Maximum Out Of Pocket - This is the maximum you have to pay out of pocket in a year. Usually around $1500 to $2500 per individual, around $5000 for a family. Once you've paid that, the insurance company will pay everything beyond.

So, here's how this works. Let's say you have a plan with $1,000 deductible, and co-insurance of 80%, and you file a claim for $2500. How much would you insurance company pay?

Take the $2500 and subtract the $1000 deductible that you will pay.

That leaves $1500. The insurance company will pay 80% of that ($1200), you will pay 20% of that ($300).

Your out of pocket expenses will be $1000 + $300 = $1300. The insurance company will pay $1200.