Understanding the 80/20 Insurance PolicyAn 80/20 insurance policy is a type of insurance that splits the cost of medical expenses between the insurer and the insured party. The insurer covers 80% of the cost while the remaining 20% is paid by the insured. This type of policy is also known as a coinsurance policy. 80/20 insurance is most commonly associated with Medicare, but it is also available in private health insurance plans.
Pros and Cons of 80/20 Insurance CoverageThere are many pros and cons to 80/20 insurance coverage. Below are some of the advantages and disadvantages. Pros:
- The 80/20 policy provides broad coverage for medical expenses
- It reduces the overall cost of the insurance plan, and monthly premiums might be lower than for other policies
- The plan promotes cost-conscious patient behavior by giving a 20% personal responsibility in the costs of healthcare
- It is a better option for people who need to visit a doctor frequently
- In case of a higher medical expenses, the 20% personal responsibility could be very high
- It might not be enough coverage for individuals with more significant health complications or serious illnesses requiring high amounts of medical expenses
- The 20% coinsurance can be a significant financial burden for people on a tight budget
- In some cases, the deductibles can be high, which the insured has to meet first.
Is 80% Coverage Enough for You?Deciding if 80% coverage is sufficient for you depends on many factors. If you are young and healthy, and you do not anticipate the need for expensive medical treatments in the future, 80% coverage may be enough. According to a Kaiser Family Foundation analysis, in 2019, the average American spent about $6,500 per year on healthcare; therefore, 80% coverage would mean a personal responsibility of $1,300.
Factors to Consider Before Opting for 80/20 InsuranceBefore choosing an 80/20 policy, you should consider several essential factors. These factors include:
- Your budget: will you be able to afford the 20% coinsurance in case of costly medical expenses?
- Your health status: if you have pre-existing conditions, check to see if they will be covered under your policy.
- The availability of preferred providers: are the hospitals, clinics, and doctors you prefer covered by your policy?
- Cost of medications: will your policy provide sufficient coverage for prescription medications?
Alternatives to 80/20 Insurance PolicyIf the 80/20 insurance policy does not seem to work for your healthcare needs, there are alternatives that you can consider. Some of these alternatives include:
- A high deductible health plan: it has cheaper premiums but has a higher deductible before insurance kicks in.
- An HMO (Health Maintenance Organization) Plan: it has lower out-of-pocket expenses but limited choice of doctors and hospitals.
- A PPO (Preferred Provider Organization) Plan: it offers more flexibility and choice of health care providers, but you will pay more for out-of-pocket expenses and monthly premiums.