What are out-of-pocket expenses in health plans?

Out-of-pocket expenses are costs that a health plan member pays on their own. They are not paid for by a health plan. These expenses can include co-pays, co-insurance, deductibles, maximum out-of-pocket expenses and the cost of coverage.

We’ll help you understand out-of-pocket expenses and equip you with money-saving tips to reduce these costs.

Types of Out-of-pocket Expenses

Here’s a breakdown of common out-of-pocket expenses to help you understand how they work in a health plan.

1. Co-pay: A flat amount paid for a health care service or prescription medication. Some plans use co-pays, while others do not. Co-pays do not accumulate toward the deductible.
2. Co-insurance: The amount a plan pays for eligible services after meeting the deductible. For example, a plan may have 80%/20% co-insurance. This means that after the deductible is met, the plan will pay 80% and the plan member will pay 20% of future costs.
3. Deductible: The amount paid out-of-pocket before the plan’s co-insurance kicks in. The lower the deductible, the more the health plan typically costs.
4. Maximum out-of-pocket (MOOP): The most a plan member would pay each year for eligible in-network health care services (excluding monthly rates) before the health plan begins to pay 100%.
5. Cost of coverage: A plan’s annual cost is the monthly rate multiplied by 12. This is the cost of having the plan, not using it.
6. Prescription medications: Depending on the health plan, prescriptions may have a flat co-pay amount or be subject to the plan’s deductible and co-insurance.

Examples of Out-of-pocket Expenses

Now, let’s look at a few examples of out-of-pocket expenses. Keep in mind that health plans function differently, so review your plan terms or call the number on the back of your medical ID card to understand your potential out-of-pocket costs.

1. A health plan member experiencing a sore throat has an in-office visit with a health care provider. The visit costs $75, and the plan member has not met their $3,000 deductible. The out-of-pocket cost is $75.
2. A health plan member picks up a prescription for high blood pressure. The medication costs $45, and the health plan has a $20 co-pay. The out-of-pocket cost is $20, which would count toward the MOOP, but not the deductible.
3. After meeting their deductible, a health plan member has knee replacement surgery. Their plan has 80%/20% co-insurance, and the surgery costs $10,000. The plan would pay 80%, or $8,000, and the member’s out-of-pocket cost would be 20%, or $2,000.

Three Ways to Save on Health Care Expenses

Being informed and making proactive choices can help you reduce out-of-pocket health care expenses. Follow these three tips to get started.

Tip #1: Save on prescription medications.

Ask your health care provider for a generic alternative, which typically costs less than a brand-name drug yet is just as effective. Also, consider switching to a 90-day mail-order prescription for maintenance medications. You may also save by comparing prices at major retailers and pharmacies to get the best price. Find more ways to save on prescription medications.

Tip #2: Know where to go for care.

Emergency room or urgent care? In-office visit or telemedicine? Find out where to go for care based on medical needs. Knowing where to go for care can help reduce out-of-pocket expenses.

Tip #3: Offset costs with tax advantages.

Health savings accounts and reimbursement arrangements offer money-saving benefits and tax advantages to help offset out-of-pocket health care costs. Explore the tax advantages and eligibility requirements for Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs).

Need more help? We’re here for you.

Whether you’re making sense of health care terms or evaluating health plan options, GuideStone^® is here to help in every season of ministry. For more information, contact us at Insurance@GuideStone.org or 1-844-INS-GUIDE (1-844-467-4843), Monday through Friday, from 7 a.m. to 6 p.m. CT.

GuideStone welcomes the opportunity to share this general information. However, this article is not intended to be relied upon as legal advice, tax advice, or medical advice, diagnosis or treatment.