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Cost-Sharing: Know What You May Owe





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Having health insurance can help protect you from paying for the full cost of your care. But, it doesn’t mean you won’t have to pay anything out of your pocket when you go to the doctor. Almost every plan involves “cost-sharing,” which means that your insurer pays for a portion of your care, and you pay a portion.

The amount you will have to pay out of your pocket depends on the type of plan that you have, and whether or not you use a provider who is contracted with your plan’s network.  If you go “out-of-network,” you may have a greater number of providers to choose from, but your costs will likely be higher.  It’s important to remember that providers aren’t just doctors. Your plan also contracts with hospitals, labs, radiology facilities and pharmacies – they are providers too. When you need care, it’s important to know if each of these providers is in your plan’s network or not, in order to anticipate what you may be required to pay.

Types of Costs

Most health plans require a premium payment. This is the amount that you pay to purchase and maintain your policy. If you have health coverage through your job, your employer may pay most or all of the cost of the premium. 

Once your premium is paid, the types of cost-sharing that you may have are:

  • Co-payments
  • Deductibles
  • Co-insurance
  • Limits
  • Allowed Charges- this is the amount your insurer will agree to pay for a service, including any amounts you have to pay. For in-network providers, it is based on contracts with the providers. For out-of-network providers, the allowed charges may be:
    • the same as for in-network providers,
    • based on the amounts that Medicare would pay for the same services, or a set multiple of that amount, or
    • Usual, Customary and Reasonable(UCR) charges, an amount that your plan determines is reasonable for that service in your local area.
  • If you use an out-of-network provider who charges more than your insurer’s allowed charge, you will have to pay the difference in addition to deductibles, co-payments and co-insurance. 
  • Out-of-Pocket Limit– Many plans have out-of-pocket limits. This limit is the most that your insurer can require you to pay over a certain period.  The out-of-pocket limit may be different for in-network and out-of-network services.  After you reach the out-of-pocket limit, your plan will pay 100% of the amount allowed for covered services up to the allowed charges for that service. Out-of-pocket expenses for non-covered services do not count toward the limit.
  • Limits on Services – Your plan may limit you to a certain number of services, like 10 chiropractic visits per year. You will have to pay the full cost of any visits above that limit. If you exceed the number of visits in your plan, the extra visits would not be covered expenses, so that expense wouldn’t count toward the out-of-pocket limit if your plan offers one. 
  • Non-covered services– Your plan may not cover some types of treatments, like cosmetic surgery, or over-the-counter medications. You will have to pay the full cost of those services. Because these would not be covered services, these expenses do not count toward the out-of-pocket limit. 

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Types of Plans

There are several different types of health plans. Here are the most common and the type of cost-sharing they generally require. 

Type of Plan What Does it Mean? Co-payments Deductible Co-insurance
Health Maintenance Organization (HMO) Your primary care physician coordinates your care, and refers you to a specialist if needed. You must use in-network providers, except for emergency care.  Yes Sometimes, such as special services like hospital stays Sometimes
Preferred Provider Organization (PPO) You can visit any provider without a referral, either in or out of your network, but you may pay more for out-of-network care. Sometimes Yes Yes
Point-of-Service Plan (POS) Your primary care physician coordinates your care, and refers you to a network specialist if needed. You can choose to go to an out-of- network specialist, but costs for out-of-network care may be higher. Yes Yes, higher for out-of-network providers Yes, higher for out-of-network providers
Exclusive Provider Organization (EPO) You can get a referral from your PCP or you can go to a network specialist without a referral.  You must use in-network providers, except for emergency care. Sometimes Yes Yes

These are some common arrangements, but your insurer may have different ones.  Be sure to check your plan booklet, your insurer’s website, or call your insurer so you can be sure you understand how your plan works.

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In-Network vs. Out-of-Network

When you stay in your plan’s contracted network, your plan will generally cover most of the costs for your care. But if you want the added flexibility of going out-of-network, your costs will usually be higher.

So, why go out of network? There are some very good reasons. If you or a loved one is facing a serious illness, you may want more options than are available in your network. Sometimes that means using a hospital that does not participate in your plan, or a specialist who has not contracted with your plan and who may charge more than an insurer would allow. 

But, patients can also go out-of-network by accident.  There are two common reasons:

  • Your primary care physician refers you to a specialist – who’s not in your network.

Don’t assume that your PCP knows the details of your plan.  If you need a referral, remind your doctor what insurance coverage you have, and ask him or her to refer you to a specialist in that plan.  When you call to make an appointment with that provider, ask the office staff to confirm that the doctor is in your network. 

You can also call your insurer or visit their website to find a doctor in your network.  Make sure you are choosing from the provider directory for your type of plan (many insurers offer HMO, PPO, EPO and POS options which may have different networks).

  • You have surgery at an in-network hospital – and then get a bill.

While your hospital may participate in your health plan, some providers at that hospital, like anesthesiologists, might not.  If you have a serious illness, many providers will be involved in your treatment. Inpatient surgery will require a surgeon, an operating room, anesthesia, medication, the hospital room and board, and more.  All of these may have separate charges.  Before you schedule your procedure, ask.

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Cost-Sharing in Action: An Example

Sometimes the difference between using in-network and out-of-network providers is pretty clear. For instance, in an HMO, if you go out of your network you’ll likely have to pay the full cost yourself. So, while you may only pay a $20 co-payment when you visit an in-network doctor, if you go outside your network, you’ll pay whatever that provider charges.

But things can get more complicated with more complex services, especially in PPOs.  Take this example.


You belong to a PPO. You need to have surgery, and your plan’s allowed charges for that procedure is $10,000 for network providers.  How much will you owe if you go to a provider in your network?

Your Costs Your Plan Pays You Pay
$500 deductible $0 $500
80/20 co-insurance $7,600 (80% of remaining $9,500) $1,900 (20% of $9,500)
    You will owe: $2,400

But, wait! Your plan’s maximum out-of-pocket limit for in-network services is $2,000. So, you will only owe $2,000, instead of $2,400.


Now, let’s say you go to an out-of-network provider. Your health plan also considers the allowed charge for your out-of-network procedure to be $10,000 – but this provider charges $15,000. How much will you owe now?

Your Costs Your Plan Pays You Pay
$500 deductible 0 $500
70/30 co-insurance (higher than in-network) $6,650 (70% of remaining $9,500) $2,850 (30% of $9,500)
Provider’s charge above allowed ($5,000) $0 $5,000
    You will owe: $8,350

What about that $2,000 out-of-pocket maximum?  Unfortunately, the out-of-pocket maximum in your plan for out-of-network services is $3,500, and it doesn’t include amounts for providers’ charges above the insurer’s allowed charges.  So, you will need to pay the full $8,350.

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Your Action Plan:  Know Before You Go

There are times when going outside your network for care is simply unavoidable. But, the choice should be up to you, and you should make that choice an informed one.  Follow these tips to help manage your out-of-pocket costs:

  • Ask your provider to refer you in-network first unless there is a specific reason why you want to go out-of-network. 
  • Before scheduling an appointment with a new provider, ask if they participate in your plan (and your network through that insurer – PPO, POS, EPO or HMO).
  • If you’re having a complex procedure, like a surgery, ask if all your providers participate, from the hospital to the lab to the anesthesiologist.
  • If you choose to go out-of-network, ask the provider’s staff how much he or she will charge before your visit. Then, talk to your insurer to find out how much of the service your plan will cover.

And most importantly – if you’re not sure, ask!  You are your best advocate. Speaking up and asking questions up front may help you avoid being surprised at what you may owe.

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