How Health Insurance Works

Health insurance can be confusing. We’re here to help.

People often ask us how health insurance works. We’ll try to explain.

Here’s an example. Say you cut your hand and needed stitches. You went to the hospital and showed them your health insurance card.

First you were asked to pay a COPAYMENT, or copay, at the time of service. Copay amounts vary depending upon your specific plan. Some plans have different copay amounts for doctor’s visits and ER visits. You then got stitched up and left the hospital.

Watch the video to find out more.

When you received the bill from the hospital and your insurance company’s Explanation of Benefits in the mail, this is what you found:

Copay (you pay) -$10
Deductible (you pay) -$500
Coinsurance (you pay) -$98
Coinsurance (insurer pays) -$392

In this example, your plan had a $10 copay, a $500 deductible and 80/20 coinsurance (insurance pays 80 percent after deductible, you pay the other 20 percent).

After paying a copay, if applicable, you must pay the amount of your DEDUCTIBLE during your plan year before your insurance company will begin sharing costs with you. In this example, your deductible is $500.

After your copay and deductible have been paid, the remaining balance is $490 in the example. Of this amount, you are responsible for your COINSURANCE percentage. In this example, your insurance company pays 80 percent ($392), and you pay the other 20 percent of what’s left ($98 in this example). Keep in mind this is only an example. Cost sharing amounts vary depending upon your specific plan.

After reaching your full deductible for the year, you will not have to pay this the next time to seek care, you will only have to worry about your copay and paying your coinsurance amount.

Please call the phone number on the back of your ID card if you have any questions.

Ryan Schuster is an editor in the Communications department at Blue Cross Blue Shield of North Dakota.