You go to the hospital, and your bill is out. You’re shocked to see the high cost despite having health insurance.

Health insurance doesn’t cover the entire cost of care, and you’re expected to pay a portion of the bill. Estimating healthcare costs can be complex due to the many variables involved. However, by following a few simple steps, you can better understand what to expect.

Before estimating your out-of-pocket cost, let’s start with the basics.

What Are Out-Of-Pocket Costs?

Out-of-pocket costs are a portion of your healthcare bill that is not covered by insurance and must be paid by you. This can include deductibles, copays, coinsurance, and the cost of services not covered by your insurance plan.

Examples Of Out-Of-Pocket Costs

Premiums

Health insurance premium is the amount you pay monthly for covered medical care. You must pay this agreed amount every month to keep your health insurance active.

Deductibles 

Health insurance deductible is the amount you must pay for covered health care benefits before your health insurance company starts to pay. If you haven’t met your deductible, you will be 100% responsible for any incurred medical costs.

Coinsurance

This is the percentage of covered healthcare costs your insurance covers after you meet your deductible. Let’s say you had a $200 doctor visit; if your health insurance company has a coinsurance of 80%, then your insurance company will pay $160 while you pay the remaining $40.

Copay 

A copay is a fixed amount you pay for covered healthcare services after you’ve met your deductible. Copays are often paid at the point of care, such as during a doctor’s visit, lab test, or prescription fill.

Why Do You Have To Calculate Your Out-Of-Pocket Cost?

Here are a few reasons why you should calculate your out-of-pocket cost:

• To know what to expect before receiving care: By calculating your deductibles and knowing your copays and coinsurance, you can better budget your healthcare expenses and avoid financial hardship.
• To make informed decisions about your care: knowing your out-of-pocket cost can also help you make an informed decision about the care you receive. For example, If you know that you have a high out-of-pocket cost for a particular service, you may choose to delay it or get it from a different provider.
• To avoid surprise bills: When you know your out-of-pocket cost, you are less likely to be surprised by a large bill after receiving care.

How To Calculate Your Out-Of-Pocket Costs

You can estimate your out-of-pocket cost in two ways: (1) Using an out-of-pocket costs calculator. (2) Estimating manually

Use Of An Out-Of-Pocket Cost Calculator

Out-of-pocket cost calculations are very complex. It requires understanding your policy, co-pay, deductible, and out-of-pocket maximum. We recommend using an out-of-pocket calculator instead of doing the computation manually.

Several online out-of-pocket cost calculators can help you estimate your healthcare expenses. Our top picks include interactive out-of-pocket cost calculator from carebetter.com due to its user-friendly interface and ease of use. Simply fill out the form, and their calculator will handle all the complex number crunching for you and output your expected out-of-pocket costs.

Some other calculators are Arup Lab out-of-pocket calculator, Calculator Academy’s out-of-pocket cost calculator, and Hawaii Pacific Health’s out-of-pocket cost calculator; however, these calculators are more complex and confusing.

An out-of-pocket cost calculator is a suitable alternative for those who avoid complex calculations, especially when you haven’t met your deductibles.

Manual Estimation

If you decide to calculate your out-of-pocket costs manually. Once you have this information, follow these steps:

1. Determine if you have met your deductible: Your deductible will often vary depending on your premium, coverage, and insurer. So write down how much your deductible costs for the year, and calculate how much you have paid off.
2. Determine your copay: This amount is also fixed for a service. If your doctor’s visit costs $200 and your plan requires a $20 copay for each visit, then you have to factor that into your out-of-pocket costs. Note that you have to pay the fixed copay every time you see the doctor even after you have met your deductible.
3. Find out your coinsurance: Depending on your insurer, you may pay a fixed coinsurance for all your services. For example, your coinsurance may be 20% for doctor’s visits and hospitalizations and 20% for specialty drug prescriptions. Some plans may have different coinsurance rates for different types of services. Keep this in mind when calculating your out-of-pocket costs.
4. Calculate your coinsurance amount:  Once you know your coinsurance rate, multiply it by the total cost of the service you are receiving to determine your coinsurance amount. For instance, if you have been hospitalized for three days the negotiated rate for your hospitalization is $12,350, and you have met your deductible, your coinsurance calculation would be:

Coinsurance rate × Total cost of medical procedure or service=Coinsurance amount    owed

0.30 (30%) × $12,350 = $3,600

This means you would be responsible for paying $3,600 out of pocket.

5. Add up all the costs to estimate your total out-of-pocket expense: Finally, add up all the costs to estimate your total out-of-pocket expense. This includes your deductible, copays, coinsurance, prescription, and other relevant expenses.

Total Estimated Out-of-Pocket Cost = Deductible + Copays + Coinsurance + Prescription Costs + Other Costs

Remember that this calculation may be a little more complex if you haven’t met your deductible.

Conclusion

Knowing how much your out-of-pocket cost is can help save you from unexpected billings. The best method for estimating your out-of-pocket cost depends on your individual needs and preferences. If you are comfortable calculating your out-of-pocket cost manually, then you can use that. However, an out-of-pocket cost calculator can be a good choice if you prefer a more convenient option.