How Deductibles, Coinsurance & Out-of-Pocket Maximums Work

Deductibles, coinsurance, copays, and out-of-pocket maximums are the basic elements to any health care plan. They determine how much you and the university contribute to your healthcare costs each plan year. In short, you must pay a specified amount of your healthcare costs out-of-pocket each year before the plan begins paying its share. First is your deductible, then your coinsurance up to the out-of-pocket maximum. After this,  the plan will pay the rest of your healthcare costs for the remainder of the year. Understanding these components is key to making the most of your coverage, ensuring you know when you're covered and how your costs are split.

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Deductible

A deductible is the amount you're responsible for paying out-of-pocket for medical services before your health plan starts to share the costs. For IU’s plans, you pay 100% of your medical costs at a discounted rate up to the amount of your deductible. This does not include in-network preventive services, which are covered by the plan at 100% from the start.

How does a high deductible health plan deductible work?

For an HDHP, all covered services, including prescriptions, are subject to the deductible except for:

  • wellness/preventive medical services, and
  • preventive prescriptions.

For employee-only coverage, you only need to meet the individual deductible.

For all other coverage levels, as each family member incurs medical expenses, the amount paid toward these expenses is credited to the family’s deductible. When these individual expenses add up to the family deductible, the plan will begin paying its share of costs for all members of the family.

The family deductible can be satisfied by one or several family members, eliminating a need for an individual deductible. In other words only the plan begins to contribute towards healthcare costs once the collective family deductible is reached, regardless of which family member incurred the expenses.

How does a traditional medical plan deductible work?

For a traditional medical plan such as the Anthem PPO $500 Deductible plan, IU SAA, or IU Resident plan, the deductible applies to all covered services except for:

  • emergency room copays,
  • in-network urgent care center copays,
  • preventive medical services,
  • prescription drugs (except drugs administered in a physician’s office), and
  • transplants.

For these types of plans, both an individual and family deductible applies. As medical expenses are incurred, the amount each family member pays toward these expenses is credited to their individual deductible and to the family deductible.

There are two scenarios where the plan will begin to pay its share of healthcare expenses for a particular individual within the family.

  • When a family member pays enough to meet the individual deductible (for example, $500), the plan starts paying its share of healthcare costs for that person.
  • Once the entire family's combined expenses reach the family deductible threshold (for instance, $1,500), the plan begins to cover healthcare expenses for all family members, regardless of whether each person has met their individual deductible.

It's important to note that each family member's contribution towards the family deductible cannot exceed their individual deductible amount.

Coinsurance

Beyond the deductible, health insurance plans typically include coinsurance. Coinsurance represents the percentage of costs that you share with your insurance plan after your deductible is met. For IU's medical plans, the in-network coinsurance is 20%. This means that after reaching your deductible, you will cover 20% of the costs for in-network services, while the plan covers the remaining 80%. This cost-sharing continues until your expenses hit the annual out-of-pocket maximum.

There is a separate deductible and coinsurance for services you receive from out-of-network providers.

Out-of-Pocket Maximums

The out-of- pocket maximum serves as a financial safety net, capping your total healthcare spending for the year . Once you’ve paid enough in deductibles and coinsurance to reach this maximum, the plan will cover 100% of covered charges for the remainder of the plan year.

Special Note: Prescriptions

For all medical plans, some prescriptions are covered at 100%, as mandated by the Affordable Care Act (ACA). You can download the No-Cost Preventive Drugs list or contact CVS Caremark directly for details.

If you’re enrolled in an HDHP, there are additional preventive medications that bypass the deductible, meaning you’re only responsible for paying the 20% coinsurance. You can download the list of HDHP Preventive Medications or contact CVS Caremark for details.

If you’re enrolled in a traditional medical plan such as the Anthem PPO $500 Deductible plan, IU SAA, or IU Resident plan, there are flat-dollar copays for prescriptions. These copays do not apply towards the plan’s medical deductible, coinsurance, or out-of-pocket maximum. Retail and mail order prescription copays are based on a tiered drug list. In general, Tier 1 is generic drugs, Tier 2 is preferred brand drugs, and Tier 3 includes non-preferred drugs. It's important to note that there's a separate out-of-pocket maximum for in-network prescription costs. This means your medication expenses are tracked separately from other medical costs.