Dubai: You may or may not hold much sway over your health insurance, but nevertheless the first two numbers everyone looks at are the ‘premium’ and the ‘deductible’. However, there are other numbers that are just as important, but often overlooked. Here’s an overview of these costs.
When it comes to the yearly costs for your health insurance plan, universally the primary cost is a recurring monthly payment, referred to as a ‘premium’ for 12 months, which is essentially the amount you pay to your insurance company each month to have health insurance.
On the other hand, a ‘deductible’ is what you pay for coverage services before your health plan kicks in. In other words, it is essentially how much you have to spend for covered health services before your insurance company pays anything.
A plan without a deductible usually provides good coverage and is a smart choice for those who expect to need expensive medical care or ongoing medical treatment
How are premiums and deductibles related?
“In most cases, the higher a plan's deductible, the lower the premium. When you're willing to pay more up front when you need care, you save on what you pay each month. The lower a plan's deductible, the higher the premium,” said Ian Bagley, a health insurance analyst based in Dubai.
“A plan without a deductible usually provides good coverage and is a smart choice for those who expect to need expensive medical care or ongoing medical treatment. Choosing health insurance with no deductible usually means paying higher monthly costs.”
However, while the ‘premium’ and the ‘deductible’ are the numbers that determine whether you can afford the policy and when it starts paying something if you get sick, as mentioned above, the ‘out-of-pocket (OOP) maximum’ and the ‘policy limit’ are the other important figures to watch out.
How do you factor in the ‘out-of-pocket maximum’?
An ‘out-of-pocket maximum’ a cap, or limit, on the amount of money you have to pay for covered health care services in a plan year. If you meet that limit, your health plan will pay all covered health care costs for the rest of the plan year. Let’s understand why that matters.
The ‘OOP maximum’ is vital to know because most of the time, even after you pay your deductible, your insurance only pays a percentage of your bill. While it used to be universally 80 per cent, now you often see 90 per cent for in-network coverage and 50 per cent for out-of-network coverage.
If a doctor or facility has no contract with your health plan, they're considered out-of-network and can charge you full price, which is much higher than the in-network discounted rate.
However, the ‘OOP maximum’ doesn't apply to out-of-network coverage, where you not only have to pay 50 per cent instead of 10 per cent (for an in-network coverage), but the amount you pay may not count toward the limit, leaving you liable to more expenses.
As an insurance plan always comes with an upper limit for out-of-pocket expenses, you do not have to pay anything after you’ve reached this limit and the insurance service provider pays the rest of the expenses. Here’s an example.
How much do have to pay with the ‘OOP maximum’?
Let’s assume your medical bills for a certain treatment are coming up to be Dh100,000, and say there is a deductible of Dh5,000. If the maximum out-of-pocket maximum is set at Dh10,000, how much do you then have to pay?
First, you will pay the deductible amount in full. After that, you will pay until you have reached the maximum limit on out-of-pocket (OOP) expenses. In this case, you will pay Dh10,000 and after that, the insurance company will pay the remaining Dh90,000.
That extent of coverage is why the ‘out-of-pocket maximum’ number matters. So as your share of charges hits the maximum, the insurance should pay the rest. “The ‘OOP maximum’ is an important number that helps determine if your insurance is worth investing in,” added Bagley.
“If your finances are such that you could afford to pay the maximum, then your insurance policy is the size you need. If they aren't, then you've got one of those increasingly common pre-paid medical packages, and it can leave you vulnerable to a medical emergency hurting your financial health.”
If your finances are such that you could afford to pay the maximum, then your insurance policy is the size you need
How do you factor in the ‘policy limit’ in a health plan?
Just like any insurance, medical insurance has a ‘policy limit’ – the most you’ll pay for coverage. A ‘policy limit’ is necessary for the insurance company to calculate how much you would be liable to pay at the most, without which the insurer would not be able to gauge what premium to charge you.
So, a ‘policy limit’ is the highest amount your insurer will pay for a claim that your insurance policy covers. “It’s important to know the ‘policy limit’ because when you surpass your plan limit, you will need to cover the remainder of your medical costs for the rest of your cover period,” said Bagley.
“Also, plan limits are not transferable. If you surpass your plan limit two months before the end of your plan, you couldn't renew and use next year's plan limit to continue paying your medical bills.”
Alongside knowing limits to the frequency with which you can seek treatment or make claims within a year, there may be monetary ‘policy limits’ on your health insurance plans may also apply in respect of specific treatments.
Typically, more comprehensive private health plans will have a higher plan limit to cover the broader scope and treatment types you may undergo. However, the plan limit itself isn’t usually a specific determining factor that influences the cost of your health plan.
In order to better understand if your health insurance is worth investing and helps protect your finances from being affected by an unexpectedly high medical bill, it helps to pay attention to the ‘out-of-pocket maximum’ and the ‘policy limit’, apart from the usual ‘premium’ and ‘deductibles’.
“Appropriate amounts for the values of ‘out-of-pocket maximum’ and the ‘policy limit’ will matter far more than the deductibles or even the premiums,” Bagley further added.
“While it’s unlikely that your deductible would influence these expenses, as they are unrelated to each other, opting for a higher deductible can possibly make a plan more affordable and allow you to choose one with a higher policy limit.”
Knowing these numbers also helps you know what limits apply to specific treatments, particularly how often you can claim for the treatments and the amount you can claim. Still, when choosing a plan, experts advise first considering your affordability if you need to undergo any kind of treatment.