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6 Health Insurance Terms Seniors Should Know Before Choosing a Medicare Plan

When kupuna become eligible for Medicare and each year during the Annual Enrollment Period (AEP), they have the option to choose between Original Medicare with supplemental insurance and a Part D prescription drug plan or a Medicare Advantage plan. While Part A and Part B (Original Medicare) and supplement plans remain the same across every market, other private health insurance options may vary based on where you live. Having a solid understanding of health insurance terms can help seniors better understand what coverage and out-of-pocket expenses come with each Medicare plan before they sign up.


6 Health Insurance Terms Seniors Should Know Before Choosing a Medicare Plan


Choosing the wrong health insurance plan can be a costly mistake that lasts the whole year until the next open enrollment season begins. These six health insurance terms are helpful for understanding the expenses associated with each plan so you don’t end up with unexpected bills.


Here are the six terms that affect the major costs associated with health insurance expenses:


1. Monthly premium


The monthly premium is the fee that you pay to your insurance provider every month to be a member in that health plan. Part B and Medicare supplement plans come with a monthly premium as well as many Medicare Advantage and Part D drug plans:

  • The standard monthly premium for Medicare Part B enrollees will be $164.90 in 2023

  • The average monthly premium for a Medicare Supplement plan (or Medigap plan) will be $155 in 2023

  • The average monthly premium for Medicare Advantage plans will be $18 in 2023

  • The average monthly premium for Part D plans will be $43 in 2023

This fee is probably the easiest to understand. Still, it’s important to understand that a plan with a lower monthly premium may not come with the coverage you need.


2. Co-pay


A copayment is a flat dollar fee paid at the time of the appointment that acts as a type of cost-sharing with the insurer. While Original Medicare doesn’t require co-pays for doctor’s visits, co-pays may come up for certain services provided under Medicare Advantage plans and for prescription drugs under Part D plans. Co-payment amounts may vary based on the type of service provider. Ask your insurance agent for a list of co-payments that come with your plan.


3. Co-insurance


Co-insurance is a different type of cost-sharing with the insurer that is calculated as a percentage of the cost of a service. Co-insurance for Medicare service is generally about 20% of the total cost. For example, if a service is billed at $2,000, the patient would be responsible for 20% or $400 of the cost of the bill. Often co-insurance kicks in after the patient has met their annual deductible (see next term). Your Medicare insurance agent can explain how co-insurance applies to the plans you are considering.


4. Deductible


Deductibles are the third type of cost-sharing that come with Medicare plans. A deductible is the annual amount that a plan member must pay out-of-pocket before the health insurer starts to pay for services. Part A, Part B and Medicare supplement plans come with a monthly premium as well as many Medicare Advantage and Part D drug plans:

  • The Part A deductible for 2023 will be $1,600 (Medicare supplement plans may cover some or most of this deductible)

  • The Part B deductible for 2023 will be $226

  • Medicare Supplement plans have deductibles, some high and some low

  • Some Medicare Advantage plans have a deductible while others have a $0 deductible

  • Some Part D plans have a deductible while others have a $0 deductible

5. Out-of-pocket maximum


Private health insurance plans, including Medicare Advantage plans, come with an annual “out-of-pocket maximum” that limits the total cost sharing plan members pay during the year. Once the out-of-pocket maximum has been reached, no further fees can be collected for that calendar year other than the monthly premium. One of the reasons that seniors choose Medicare Advantage plans over Original Medicare is because Medicare Advantage plans come with an out-of-pocket limit. The Medicare Advantage out-of-pocket maximum for 2023 will be $8,300.


6. In-Network vs Out-of-Network


Unlike Original Medicare, Medicare Advantage plans generally come with a network of health care providers that are part of an insurer’s preferred network. The insurance company signs contracts and negotiates prices with these in-network providers and plan beneficiaries are expected to choose providers within this network for the best reimbursement rates. On the other hand, “out-of-network” providers do not have contracts with the insurer and as a result, deductibles and out-of-pocket expenses such as co-insurance are much higher when care is received from these providers.


Talk to your Medicare insurance agent about all potential costs associated with the plans you are considering so you can accurately compare plans and make the best choice for your needs and budget.


Contact a PBC Agent for Help


Our independent insurance agents are dedicated to assisting people on Medicare and those who are ready to transition from employer coverage to personal retirement coverage. We help kupuna understand their benefits options and apply for additional coverage, as needed. We are the only insurance agency in Hawaii contracted with EVERY Medicare Advantage plan, which means we are able to offer unbiased advice; all at no cost to our clients.


At PBC, our clients are our number one priority and we look forward to getting to know you and your needs. Call us today at (808) 738-4500 to see how we may be of assistance.

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