In order to avoid paying too much for your health insurance premiums you will need to have a basic understanding of how to compare health insurance policies. I've been helping people find health insurance in Connecticut since 1985. Over the last several years I've almost exclusively advised clients regarding medical insurance and rarely a day goes buy without someone asking me "What is a deductible?" or "What is a co-pay?" In this article I will try to outline the steps I take to help people compare different health insurance policies and to find affordable health insurance. Without this information people often pay too much for their policies.

Health insurance policies typically use terms such as:

• deductible
• co-pay 
• coinsurance 
•  out-of-pocket maximum

These terms make doing the math and determining whether your affordable health insurance policy is actually a good insurance policy. To make it more difficult a medical insurance plan may use different equations for different types of medical expenses.

Medical insurance definitions:

Deductible this is the amount of covered medical expenses for which you are 100% responsible. You will have a new deductible each year. Usually this is based on a calendar year instead of a year that begins on your policy anniversary.

For example, if you are a $1,000 deductible, and incur $10,000 worth of expenses over the course of 2007, you will have to pay the first $1,000. Your health insurance company will be responsible for some percentage of the remaining $9,000. Your deductible may or may not apply to all types of expenses that your health insurance plan covers.

Co-Pay this is the amount of covered medical expenses that you are responsible for on a per-event basis. Typically health insurance co-pays apply to doctor's visits and prescription refills.

For example you may have to pay the first $25 for each doctor's visit or the first $15 for each 30-day supply or your medicine. Usually an expense that is subject to your deductible will not be subject to a co-pay and vice versa. However, often this is not the case, so please check your health insurance policy to see how it handles this.

Coinsurance this is the percentage of covered expenses for which you are responsible after you've met your deductible. Typically an insurance company will pay 80% and you will pay 20% for a certain range of expenses that exceed your deductible. The 20% that you are responsible for in this scenario is your coinsurance. Coinsurance amounts may vary from one health insurance plan to another. Coinsurance may or may not apply to all types of expenses that your health insurance plan covers.

Out-of-pocket maximum this is, on its surface, the maximum you will have to pay for covered medical expenses during the course of the year. You may need to add your deductible and co-pays to this figure to determine you actual maximum. Ask your health insurance agent or read your policy carefully to determine how a particular health insurance plan does the math on this.

Here are some scenarios:

If you had $10,000 of medical expenses over the course of a calendar year and had a medical insurance policy with a $1,000 deductible and no co-pays and no coinsurance you would pay the following: You would pay only the first $1,000 and your health insurance company would pay the rest.

If you had $10,000 of medical expenses over the course of a calendar year and had a medical insurance policy with a $1,000 deductible and no co-pays, 80/20 coinsurance and a $2,500 out of pocket maximum you would pay the following: $1,000 plus 20% of the $7.500 balance ($1,000 + $1,500 = $2,500). If your out-of-pocket-maximum included your deductible and your expenses were $100,000 you would still only pay $2,500 for that calendar year.

If you had $10,000 of medical expenses over the course of a calendar year and had a medical insurance policy with a $1,000 deductible and $25 co-pays for doctors' visits and $20 co-pays for prescriptions, 80/20 coinsurance and a $2,500 out of pocket maximum you need to know how may doctors' visits you had and how many prescriptions you had to fill. Let's assume that you had 5 doctors visits that cost a total of $1000 and no prescriptions. In this scenario, you would pay the following: $125 or 5 times $25 for your doctors visit co-pays, then you would pay $1,000 plus 20% of the $6,500 balance ($1,000 + $1,300 = $2,300). Your total would be $2,425.

Please note that the above scenarios assumed that all of the expenses were generated by one person's medical bills. Each family member may have to meet his or her own deductible and out-of-pocket maximum. However, usually health insurance companies will put limits on your exposure. Often, if two family members meet their deductible no other family members will need to meet theirs. The same is usually true of out-of-pocket maximums.

As mentioned above, I sell health insurance in Connecticut. Some if the information in this article may not apply if you are looking for affordable health insurance in Florida for example. However, the basic principles will apply all over the US.

To Summarize

Hopefully this information will help you get a better understanding of how insurance policies work. Hopefully it will help you to compare different medical insurance policies and avoid paying too much for health insurance.

This article can be copied and reprinted but only in its entirety.  The article was originally published on http://www.1800insurancect.com/articles/health_insurance_math.htm  .  The article starts with the heading "Health Insurance Math" and ends with this sentence.