With more than 2 million Covid-19 cases in the US, it’s more evident than ever the role of health insurance in your financial and physical health.
Understanding healthcare costs can help you make informed decisions in choosing your healthcare provider and insurance plans. Often, we don’t see how important these decisions are until we’re on the recovery-end of a medical emergency with a mailbox stuffed with bills and “explanation of benefits”.
Your health insurance is actually a contract of benefits.
This contract requires your insurance company to pay some or all of your healthcare costs in exchange for a premium. In employer-based health plans, this premium is often paid in-part by your employer with the remaining portion being deducted from your paycheck.
(With the AHCA, those who do not have an employer provided insurance can go through the marketplace. You may be eligible for an income based subsidy that will in-part pay for the premium.)
The bad news is even if you have health insurance, you will still have healthcare expenses associated with any service. Because every plan is different, it’s important to get comfortable calling your insurance company and ask what your responsibility will be for every service.
Your health insurance company may not contribute to your expenses until the deductible is met.
A deductible is the amount you pay for a service before the insurance company begins paying.
Every procedure, exam, lab, and healthcare service is negotiated for a contracted rate by the insurer. This rate is what you’re charged if you haven’t met your deductible. For example, the total charge of having your tonsils removed may be $8,500, but you have a $2,000 deductible. In order for an insurer to contribute to the cost of the service, you must first meet the $2,000 deductible. The insurance company will not contribute to the cost of your surgery until you pay the deductible.
If you have a high deductible plan, you could face costs as high as $6,900 before your health insurance will cover ANY charges. These plans typically have lower premiums but you’ll be paying for a greater share of the costs before any contribution by the insurance company. You could use your Health Savings Account (HSA) or Flexible Spending Account (FSA) to help cover the costs of your deductible, but some employers don’t offer them as part of their benefits package.
Some more of the bad: Some plans have separate deductibles for prescriptions. One pharmacist says, “It’s always best to compare your price with insurance versus GoodRx or self-pay. Many times the medication is cheaper by paying out of pocket. However, that will not go towards your deductible.” (Check out more from this pharmacist: here)
The good news: Preventative benefits like mammograms or annual wellness visits may be covered at no charge before meeting a deductible. Each plan is different. To find your policy specifics, call your insurance company.
Other important factors: If your family is on the plan, you may have a large family deductible and/or an out-of-pocket max.
An out-of-pocket maximum is the monetary limit an insured patient will have to pay for a plan year.
While most plans start in January, some plans begin throughout the year. Any copayments, co-insurance payments, and deductibles collected throughout the plan period contribute to the out-of-pocket max. If you meet your out-of-pocket maximum, your insurance plan will cover 100% of the costs of covered benefits.
Going back to your imaginary tonsillectomy, once you meet your $2,000 deductible, you will still be financially responsible for meeting your out-of-pocket maximum of $5,000 before insurance will cover 100% of covered charges.
The good and the bad: Once your deductible is met, you typically will only be charged a portion of the total contracted rate for the service provided until you meet your out-of-pocket max.
Co-insurance is what’s charged between meeting your deductible and your out-of-pocket maximum.
Typically, co-insurance is a percentage of the total charge of a contracted rate.
Once you meet your $2,000 deductible, your coinsurance for the procedure is 20% of the total charge of the $8,500 procedure. 20% of $8,500= $1,700. Add this to your deductible and the total charge for your tonsillectomy is $3,700, still short of your out-of-pocket maximum.
Co-insurance is your share of the costs of any service provided until an out-of-pocket maximum is met.
The bad: You’ll be responsible for your co-insurance until you reach your out of pocket maximum
The good: Once you meet your out-of-pocket maximum, every covered charge the remainder of the plan year is covered by your insurance. Co-payments made throughout the year also contribute to your total out-of-pocket maximum.
A copayment is a fixed amount you pay for a service.
Prior to your tonsil surgery, you probably had multiple appointments with a primary care doctor and a specialist. Your insurance company contracts with a provider to pay $100 per office visit, but because you have health insurance, your co-payment is only $20 per visit. Typically, the charge for a specialist is more. These vary from plan to plan but often the information is found on the front of your insurance card. If they’re not, call your insurance company.
Labs and bloodwork, physical therapy, and even visits to specialists often have different co-pays within a plan.
The good: Your insurance plan is covering most of the cost of your visits.
The bad: They don’t pay for all of it until after you meet your out-of-pocket maximum.
And if it weren’t complicated enough, many insurance plans contract with particular providers. This means a fee for a service could vary depending on who provides the service. In-network and out-of-network benefits vary from plan to plan.
In-network providers contract with the insurer to provide reduced rates for healthcare services.
Commercial health insurance companies contract with providers for reduced rates in services to provide in-network benefits. It’s important to contact your insurance company in order to find a list of providers on your insurance plan or you may be held financially responsible for what they don’t cover.
The bad news: Having a surgery? Your anesthesiologist, surgery facility/hospital MAY not be in-network while your surgeon is. It’s your responsibility as the patient to ensure that you are covered. Call your insurance company and ask.
The good news: Staying in-network keeps your medical expenses lower.
An HMO (Health Management Organiztion) is a particular type of plan that limits coverage to providers and won’t cover out-of-network care except in an emergency.
Patients are typically required to go through a primary care doctor for authorization to see specialists and have medical procedures approved. HMOs are also typically restricted to a certain region so if you travel a lot, this may not be the plan for you.
The good: they typically have lower premiums and focus on preventative healthcare.
The bad: you’re highly restricted with which doctors you see when you have a problem.
Excluded services –
Not every service will be covered by a health insurance plan. Common exclusions include elective procedures like lasik or plastic surgery. Call your insurance company to see what is covered.
No matter what age you are and how healthy you’ve been, accidents and illnesses happen. By understanding the terms of your policy, you can empower your healthcare coverage decisions. Afterall, good health insurance policies can prevent catastrophic financial outcomes.
Prepare for the unexpected. Having life insurance gives your family options by providing financial benefits to pay off debt and pay for housing and ongoing living expenses. Not sure where to start? Bestow breaks down your coverage questions and the process is 100% online.
Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice.