Math Skill 9 - Out-of-Pocket Insurance Costs

These steps are used to determine how much you will have to pay as a result of a medical or auto insurance claim. Auto and health insurance policies apply costs to the patient in the exact same manner. This section will talk entirely about health insurance, but it is important to note that this same process works exactly the same for auto insurance claims.

Steps to calculate the Patient share of insurance claim.

1. Pay Deductible

Total Bill – Deductible = Insurable Expense

2. Apply Co-Insurance (X/Y)

Insurance pays: X% * Insurable Expense

Patient coinsurance = Y% * Insurable Expense

3. Calculate total patient share of costs.

Patient share = Deductible + Patience Coinsurance

4. Check Out-of-Pocket Limit

If patient share > Out-of-Pocket Limit, then you pay only out-of-pocket limit.

If patient share <= Limit, then you pay the patient share from step 3.

5. Add Copayments (if applicable)

Example Problems

Example 1

You have a traditional health insurance policy with a $250 deductible, 80/20 coinsurance, and $1,000 out-of-pocket limit. If your medical bill totals $8,760, how much will you have to pay, after insurance?

1. Pay $250 deductible. $8,760-$250=$8,510

2. Pay Coinsurance. 20% * $8,510 = $1,702

3. Patient share = Deductible + Coinsurance = $250 + $1,702 = $1,952

4. Check Out-of-Pocket Limit.

5. Patient’s share of $1,952 is greater than the $1,000 limit, therefore you will pay only the limit of $1,000.

Example 2

Randy spends a few nights in the hospital. His medical bills total $4,000. He has "Blue" Insurance policy, with a $500 deductible, 20% coinsurance rate, and a $1,500 out-of-pocket limit. How much does Randy have to pay under the Blue policy?

1. Pay $500 deductible. $4,000 - $500 = $3,500

2. Pay Coinsurance. 20% * $3,500 = $700

3. Patient share = Deductible + Coinsurance = $700 + $500 = $1,200

4. Check Out-of-Pocket Limit.

Patient’s share of $1,200 is less than the $1,500 limit, therefore Randy will pay the full patient share of $1,200.

Example 3

Randy spends a few nights in the hospital. His medical bills total $4,000. He has "Green" Insurance policy, with a $1,000 deductible, a0% coinsurance rate, and a $1,200 out-of-pocket limit. How much does Randy have to pay under the Green policy?

1. Pay $1,000 deductible. $4,000 - $1,000 = $3,000

2. Pay Coinsurance. 10% * $3,000 = $300

3. Patient share = Deductible + Coinsurance = $1,000 + $300 = $1,300

4. Check Out-of-Pocket Limit.

Patient share of $1,300 is greater than the $1,200 limit, therefore Randy will pay the out-of-pocket limit of $1,200.

Watch it in Action!

Practice Problems

1. Health Insurance Policy A has a $4200 deductible, with a 90/10 copay and a $12600 out-of-pocket limit. If your medical expenses for the year total $13100, what will be your share of these expenses?

2. Health Insurance Policy B has a $3000 deductible, with a 100/0 copay and a $3000 out-of-pocket limit. If your medical expenses for the year total $9100, what will be your share of these expenses?

3. Health Insurance Policy C has a $5600 deductible, with a 90/10 copay and a $10640 out-of-pocket limit. If your medical expenses for the year total $6200, what will be your share of these expenses?

4. Health Insurance Policy D has a $4800 deductible, with a 100/0 copay and a $4800 out-of-pocket limit. If your medical expenses for the year total $2800, what will be your share of these expenses?

5. Health Insurance Policy E has a $3800 deductible, with a 90/10 copay and a $6460 out-of-pocket limit. If your medical expenses for the year total $22800, what will be your share of these expenses?

6. Health Insurance Policy F has a $5800 deductible, with a 90/10 copay and a $14500 out-of-pocket limit. If your medical expenses for the year total $20000, what will be your share of these expenses?

7. Health Insurance Policy G has a $3100 deductible, with an 80/20 copay and a $8680 out-of-pocket limit. If your medical expenses for the year total $18700, what will be your share of these expenses?

8. Health Insurance Policy H has a $4700 deductible, with a 90/10 copay and a $11280 out-of-pocket limit. If your medical expenses for the year total $20800, what will be your share of these expenses?

9. Health Insurance Policy I has a $6000 deductible, with a 100/0 copay and a $6000 out-of-pocket limit. If your medical expenses for the year total $11800, what will be your share of these expenses?

10. Health Insurance Policy J has a $2700 deductible, with an 80/20 copay and a $5400 out-of-pocket limit. If your medical expenses for the year total $21900, what will be your share of these expenses?

Solutions

1. You first pay $4200 towards your deductible. You then pay 10% of the remaining $8900 of insurable expenses. Your total cost then is $4200 + 10% * $8900 = $5090.

2. You first pay $3000 towards your deductible. You then pay 0% of the remaining $6100 of insurable expenses. Your total cost then is $3000 + 0% * $6100 = $3000.

3. You first pay $5600 towards your deductible. You then pay 10% of the remaining $600 of insurable expenses. Your total cost then is $5600 + 10% * $600 = $5660.

4. Since the expense is less than the deductible, you pay the entire $2800 bill.

5. You first pay $3800 towards your deductible. You then pay 10% of the remaining $19000 of insurable expenses. Your total cost then is $3800 + 10% * $19000 = $5700.

6. You first pay $5800 towards your deductible. You then pay 10% of the remaining $14200 of insurable expenses. Your total cost then is $5800 + 10% * $14200 = $7220.

7. You first pay $3100 towards your deductible. You then pay 20% of the remaining $15600 of insurable expenses. Your total cost then is $3100 + 20% * $15600 = $6220.

8. You first pay $4700 towards your deductible. You then pay 10% of the remaining $16100 of insurable expenses. Your total cost then is $4700 + 10% * $16100 = $6310.

9. You first pay $6000 towards your deductible. You then pay 0% of the remaining $5800 of insurable expenses. Your total cost then is $6000 + 0% * $5800 = $6000.

10. You first pay $2700 towards your deductible. You then pay 20% of the remaining $19200 of insurable expenses. Your total cost then is $2700 + 20% * $19200 = $6540. Since this is greater than the $5400 out-of-pocket limit, you pay only $5400.