A family can pay their health insurance premium every month and still hesitate to see a doctor because of what the visit might cost. Or worse, an employee may believe the plan they chose through their company covers a specialist, only to learn it does not once they are at the provider’s office. Misunderstandings can have very real consequences for a person’s health, not to mention their wallet.
Every day, Americans are asked to make complicated insurance decisions with little preparation and are often expected to navigate the consequences while they are sick. Before choosing coverage, they deserve a clear explanation of what they will pay and how the plan will work when they need care.
The first lesson is simple: choosing a health insurance plan requires understanding what happens when you need to use it.
Affordability has to include the cost of care
When comparing health care coverage plan options, the monthly premium is the most visible number. For a family managing a tight budget, it can quickly become the only number that matters; however, a lower premium may leave that family responsible for costs it cannot comfortably pay when care becomes necessary.
Other numbers and important terms to take into consideration can include:
- Deductibles: A deductible is the amount a person pays for certain services covered before the plan begins sharing those costs. Some benefits may be available before it is met.
- Copays and Coinsurance: A copay is a fixed charge for a covered service. Coinsurance is a percentage of the allowed cost for a covered service. Meeting the policy’s deductible does not necessarily end these payments; however, they usually end once you meet the annual out-of-pocket maximum.
- Out-of-pocket maximum: This is the total amount of money a person or family must pay for all services covered by a health care plan before a person’s or family’s health insurance plan starts to pay 100% of the allowed amount for covered services for the rest of the year.
- In-Network Coverage: Refers to health insurance benefits applied when you receive medical care from health care providers and facilities that have a contractual agreement with your insurance plan.
- Out-of-Network Coverage: Refers to health insurance benefits that may or may not be applied when you receive medical care from health care providers and facilities that do not have a contractual agreement with your insurance plan.
Consider two hypothetical health insurance plans. Plan A costs $300 a month ($3,600 annually), with a higher deductible and potentially higher copays. Plan B costs $450 a month ($5,400 annually) and has a lower deductible, fewer copay-required services, and lower copay amounts. On the surface, Plan A may seem cheaper than Plan B, but that may not be true. For example, if someone has a pre-existing condition or needs to use the plan more than expected, Plan B may be the better option, depending on covered services.
Based on the person’s expected medical needs and actual usage, the high deductible and copays under Plan A could leave them paying more for care compared with Plan B. In other words, their total annual spending could be higher on Plan A than with Plan B. Choosing the higher monthly premium could save this person significant money over the year. Someone who needs less care may spend less overall with Plan A.
It is important to consider each person’s individual needs, and sometimes it is impossible to predict whether care will be needed. If care needs are substantial, such as a lengthy hospitalization, this may also affect which policy costs less over a year, since the final annual cost may be determined by the policy’s out-of-pocket maximum.
An advisor should explain how the out-of-pocket maximum would protect an employee’s family during an expensive medical year, but people still need to enter the conversation with at least some understanding. Monthly premiums, out-of-network care, non-covered services, and balance billing do not count toward an annual out-of-pocket maximum on health coverage plan policies.
Under the Affordable Care Act, the federal marketplace has capped in-network out-of-pocket maximums at $10,600 for an individual and $21,200 for a family. Currently, there are no federal ACA marketplace caps for out-of-network out-of-pocket maximums. Out-of-network costs accumulate separately and are tabulated independently. Therefore, out-of-network costs are not factored in and do not count towards in-network out-of-pocket maximums.
Suppose a plan has a $10,600 maximum. If a member’s payments toward the deductible, copays, coinsurance, and payments towards services provided reach that amount, the plan usually pays the full cost of covered in-network care for the rest of the plan year. The member must still pay monthly premiums after reaching the annual out-of-pocket maximum limit.Services the plan excludes and most out-of-network expenses do not count toward that limit, so total spending can exceed $10,600.
Before enrolling, ask what those numbers could mean for your household budget. Someone may be able to afford the monthly premium but struggle to pay several thousand dollars out of pocket if they need surgery during the year that the insurance company may cover under a different plan. Showing people how each plan would handle that situation helps them evaluate whether they could manage the costs when care becomes necessary.
A familiar insurance name does not guarantee access
A doctor’s office may accept insurance from a certain company without participating in every plan that company sells. An insurer might offer one plan that includes a particular hospital but another plan that excludes it. Just because someone has heard of that insurance before does not mean it offers wider coverage.
Before enrolling, consumers should check whether their physicians and preferred hospitals participate in the exact plan they are considering and confirm this with both the insurer and the provider’s office, using the full plan and network name. Otherwise, a patient could face higher charges or have no coverage for routine care from that provider.
Even an in-network listing leaves practical questions unanswered. Is the physician accepting new patients? Is the nearest participating specialist within a reasonable distance? Someone planning to spend retirement between two states should also ask whether the plan covers routine appointments and other services in both locations. Coverage must work where the person will need care.
Prescription coverage deserves its own review
Two plans can cover the same medication and charge very different amounts for the same prescription. Each plan has a formulary, a list of covered drugs organized into tiers that determine the patient’s share of the cost. One plan might charge a fixed copay for a prescription, while another requires the patient to pay a percentage of its price.
Consumers should check every ongoing prescription, including its dosage, and ask what they would pay at their usual pharmacy. They also need to know whether a prescription deductible applies. If so, they may have to pay the plan’s negotiated price until that deductible is met. Also, the same medication may cost different amounts at different pharmacies.
Some medications come with additional requirements. Prior authorization means the insurer must approve coverage before paying. Step therapy may require trying another medication first, and any applicable quantity limits restrict how much the plan covers within a given period. Patients already taking medication should clarify these requirements before switching plans and ask about the exceptions process if their treatment is not covered.
Compare plans against the care a person expects to need
A useful comparison begins with the person’s health needs. Someone seeing a specialist every month needs to calculate the cost of repeated visits. A patient expecting surgery should ask the hospital about expected charges and whether the surgeon and other clinicians involved are in-network.
No one can predict every expense, but telling an advisor about planned treatment and recurring prescriptions makes the comparison more useful. If someone needs family coverage, they should ask whether one person can meet an individual deductible and begin receiving benefits before the whole family meets its deductible.
Consumers should also understand the steps required to obtain care. Does a specialist visit require a referral from a primary care physician? Does an MRI require prior authorization? Are there limits on covered physical therapy visits? A physician’s recommendation does not automatically mean the insurer will pay for every service.
The Summary of Benefits and Coverage helps compare costs and benefits. Specific questions may require reviewing the full plan documents or contacting the insurer. To help employees decide, employers should resolve questions whenever possible before the enrollment period begins.
Good guidance makes the choice understandable
An advisor can help consumers compare plans and work through coverage questions. Consumers should ask which insurers the advisor represents and whether other options exist.
Before accepting a recommendation, people should understand what care each family member needs, what that expected care would cost, whether their doctors participate, and which expenses could strain their budget.
It is hard to make informed decisions when the consequences are left unexplained. Helping a family understand their coverage before illness strikes supports building a more compassionate health care system.