Health Insurance 101

It’s Open Enrollment time and that means we are all thinking about Healthcare. Whether you are working for a company that contributes to your plan payment or you are buying through a marketplace for you and your family, selecting the best plan can be confusing and overwhelming.

At the end of the day you are likely to spend the monthly premium (less what an employer may contribute) and the deductible amount plus co-pays.

This article walks you through:

• Basic Health Insurance plan types

• Putting all the information together and selecting the best plan for you & your family

• Key factors to consider when evaluating health insurance plans

PPO plans

PPO plans allows you to choose your own doctors without having to use a referral process. PPO have contracted with a network of physicians and hospitals from which members can select to receive health care. Costs vary based on copayment amount, out of pocket expense, and deductible chosen. PPO coverage for services has both hospital, physician, pharmacy, DME (durable medical goods), Mental health, rehab care, and Ambulatory Surgical Centers. Insurance plans have no foreign country coverage during travel, that would require an additional policy.

HMO plans

HMO use the gatekeeper method of care. Your primary care provider PCP manages your care and your access to other providers. If you need to see a specialist, you must see your PCP first for the referral or the insurance will not cover the visit. HMO has the same coverage of services as PPO hospital, physician, pharmacy, DME, Mental health, rehab care, and Ambulatory Surgical Centers.  Insurance plans have no foreign country coverage during travel, that would require an additional policy.

Key Factors to Consider When Evaluating Healthcare Plans:

There are three major variables that will impact your healthcare spending in a year. When evaluating medical insurance plans, be sure to look at all three categories.

Plan Premium: This is the amount you will pay monthly to the insurance company. Frequently, it is partially paid by an employer and deducted from your paycheck. The higher the monthly premium, typically the lower your deductible, and possibly a lower out-of-pocket.

Out of pocket expenses: An annual out-of-pocket maximum is the limit the guarantor (the person who has the insurance plan in their name) will have to pay for healthcare services regardless if PPO or HMO. The out -of-pocket maximum does not include the cost of the plan premium (plan premium is the monthly cost of insurance coverage and is sometimes deducted from paychecks). Once out-of-pocket is met the insurance then pays 100% minus the copay and monthly premium amount.

Copay amount: This is the amount in your insurance plan that you are responsible for each type of visit. Typically, we see $10-$25 for physician office visits, $250-$500 for Emergency Room visits, $500-$1000 for hospitals for outpatient procedures. The copay is agreed by you the guarantor to contractually pay each type of visit. For example, a patient who needs a rotator cuff repair might 1) see an orthopedic specialist, then 2) get an MRI at a radiology facility, 3) return to the specialist to develop a plan, 4) have a procedure at a hospital or ambulatory surgical center. For each of the steps above (1-4) the patient will have to pay a co-pay that differs by provider, and does not contribute to your out-of-pocket maximum. Please note that co-pays are contractually agreed on payments as part of your plan. This means that, if you are trying to negotiate your bill, co-pays will not be part of the negotiation or the negotiated amount.

Deductible: An annual deductible is the amount of money you must spend on covered health care services before your insurance plan begins to cover any of the costs. The deductible only looks at spend on health care and does not include copay and plan premium spending. We see plans with $6k-$10K deductibles because it lowers the monthly premium cost. It also means that most of the normal care that people receive will be paid from you the guarantor. Plans with a high deductible are beneficial primarily in a catastrophic event where the hospital bills are high.

INSERT CAUTION SIGN: Deductibles are different from Out-of-Pocket Maximums. A deductible is a contractual amount that the guarantor must pay before insurance plans will cover any percentage of cost. Whereas, an out-of-pocket maximums look at the amount of spend in a contracted period of time before the insurance company will pay 100% after copays and premium plan costs.

HSA: is a health savings account. Each month you put a specific amount of money into your HSA to cover health related expenses. If you have a high deductible, having an HSA is beneficial. Some employers will match funds up to a certain amount or percentage on HSA. There are limits on the amount you can save in the account per year. There are also accounts that have unused funds moved into the new yearly account, or a percentage of unused funds. Read the small print for the requirements.

PUTTING IT ALL TOGETHER:

When evaluating plans, guarantors must consider all the four factors defined above:

• Plan Premiums

• Deductible

• Out-of-Pocket Maximum

• Co-Pay: Please note these vary by type of service

• HSA

Plan Premiums impact your total expense on healthcare and are not negotiable. Deductible tells you what you must spend before your insurance pays its portion. Out-of-Pocket Maximum is the dollar amount you will be responsible to pay in the year before insurance will pay 100% of expenses after co-pay.

Everyone should start by considering plan premiums and what they would be responsible for on a monthly basis and then look for the lowest deductible available. At the end of the day you are likely to spend the monthly premium (less what an employer may contribute) and the deductible amount plus co-pays. The out-of-pocket maximum is another factor that may be important if you have a condition that requires regular physician visits or expensive pharmaceuticals.

When you have narrowed plans based on cost and deductible, there are a few remaining steps:

• Consider the coverage available per plan for well visits, pharmacy, and other routine dr. visits (OB/Gyn, pediatrics, etc.).

• Review your plan for hospital coverage so that you understand the types of fees you will have in the case of an unexpected medical event. Remember that you may still need to pay co-pays after your out-of-pocket maximum is met. Include in your review co-pays for:

  • Co-pays for in-patient and out-patient stays

  • Emergency visits

  • Surgery & lab work

  • Specialist Doctors

• Finally, contact your current physicians to see if they accept the plan you are considering and are in-network.

Once you have selected a plan, you will have a good sense of your anticipated spend and you can begin to think about how much to put into an HSA account. For more information on HSA’s check out our article!