What do you need to know?
The open enrollment period for health insurance is fast approaching. This year it is shorter and some states have less options to choose from than previous years. How do you choose? What is the difference between all the different terms? What should you be looking for?
Health insurance can be very confusing. The first step is to understanding the terms that are used. A premium is how much you pay each month, or quarterly in some cases. A deductible is the amount of money you pay for medical expenses in a calendar year. Typically, after this is met you either pay nothing or share any remaining costs with the insurance company up to the out-of-pocket maximum. Out-of-pocket maximum is the top amount of money that you spend in a calendar year for health care related expenses. It may or may not include the deductible depending on your insurance policy. Co-insurance is when you are sharing healthcare costs with the insurance company. You pay a percentage of the medical expenses and your insurance company pays the rest (usually somewhere between 50/50 and 20/80). Co-pay, or co-payment, is a set fee that you pay for a doctor’s visit or service (varies from $10 – $40). Typically, there is a balance between the premium, deductible, coinsurance and out-of-pocket maximum. This means that the higher the premium is, the lower everything else is and vice versa. The overall process is that you pay 100% of medical expenses up to the deductible amount, then you pay your co-insurance amount for any costs up to the out-of-pocket maximum. After you reach your out-of-pocket maximum, your insurance company pays all medical expenses.
There are several different types of health insurance plans, such as HMOs, PPOs, POSs, HDHP and Indemnity plans. Health Maintenance Organizations (HMO) offer comprehensive health insurance coverage with a low cost to the consumer. Often, there are no deductible or co-pays, but if there are, they are very low. The biggest downfall is that you can only use in-network doctors and services. Preferred Provider Organizations (PPO) and Point of Service (POS) were created to offer people choices that HMOs don’t. Both plans allow you to choose to go to in-network providers and you pay a small co-pay or you could go out-of-network and be reimbursed a portion (60-70%) of your medical expenses. The big difference between PPO and POS is that you need a referral from your primary care doctor to see a specialist if you have a POS plan—this is not a requirement under a PPO plan. High-Deductible Health Plans (HDHP) are usually paired with health reimbursement or savings accounts. They work like PPOs, but their deductible is much higher. With the savings account plan, you can put into it pre-tax dollars and then withdraw it as needed to pay for out-of-pocket medical expenses. Sometimes, your employer contributes money in the account. The money does roll over from year to year, so you can have an emergency medical fund. The nice thing about these accounts is that when you turn 65, you can take the remaining money out of the account and don’t pay a penalty (you do have to pay taxes if you are not using it for medical expenses). With a health reimbursement account, it is financed solely by your employer. They typically provide an amount that is equal to about half of your deductible. The money rolls over from year to year, but you can’t take it with you when you turn 65. Indemnity plans are known as fee-for-service plans that allow you to go to any doctor, hospital, etc. that you choose. The plans reimburse 80% of out-of-pocket costs after you meet an annual deductible. This are more expensive for employers, so fewer and fewer are offering them. Note, Flexible Spending Accounts are not usually set up as part of an insurance plan, but may be offered by your employer. Similar to a health savings account, you can set aside pre-tax dollars to pay for out-of-pocket medical expenses. However, you can only set aside up to $5000 or lower limit that is set by your employer and the money doesn’t roll over from year to year.
Within in each plan, there are five different levels which are based on the percentage of healthcare costs that is paid by the insurance company versus the percentage you pay. The percentage is an estimation of the amount medical care an average person would use in a year. The more you think you will need to use healthcare services, the higher the level plan you should pick because more of the cost is covered by the insurance company. The higher the level the plan means that your premium will be higher, but your deductibles, co-pays, co-insurance and out-of-pocket maximum will be less. The lowest level of coverage is a catastrophic plan. These plans have extremely high deductibles and pay less than 60% of your healthcare costs, but the monthly premiums are incredibly low. They are only available to people under the age of 30 or those who are experiencing financial hardship. The next level up is the bronze level and this pays for 60% of your healthcare costs and you pay for 40% up to your out-of-pocket maximum. These types of plans usually have lower monthly premiums, not as low as catastrophic plans, and higher deductibles. From the bronze level, you have silver with a 70/30 split , gold with an 80/20 split and platinum with a 90/10 split.
All of this is a significant amount of information to consider and this year, you have even less time to figure it all out due to the new mandate set for by the president decreasing the time of open enrollment from 2 months to 45 days. Open enrollment is the period of time that you can enroll in a health insurance plan without needing to have a qualifying life event. A qualifying life event is described as getting married, having a baby, adopting a child, placing a child up for adoption/foster care, moving outside your current health insurer’s coverage zone, becoming a US citizen, leaving incarceration, losing health coverage due to job loss/divorce/COBRA expiring/aging off of a parent’s plan or losing eligibility for Medicaid or CHIP (Children’s Health Insurance Program). For people with coverage from the Health Insurance Marketplace, a change in income or household status that affects the eligibility for premium tax credits or cost-sharing reductions qualifies as a life event. COBRA stands for Consolidated Omnibus Budget Reconciliation Act and allows you to remain on a company’s health insurance plan for up to 18 months after you have left the company. There are two stipulations: the company must have more than 20 employees and you will have to pay full premiums plus a 2% administrative fee. This can make it very expensive, especially if you aren’t working, so it is only good as a temporary coverage option.
Since the Affordable Care Act (ACA) was put into place, several of its policies have had a positive impact. You can’t be denied an individual health plan due to a pre-existing condition. All caps on the amount of benefit you receive have been eliminated and you can’t be force to pay more than a certain amount out-of-pocket. There are certain benefits that are deemed “essential health benefits” and all health insurance plans must cover them. These benefits include outpatient care, emergency care, hospitalization, pregnancy/newborn care, mental health/substance abuse services, prescription drugs, rehabilitation services, lab tests, preventive/wellness services and dental/vision care for children. This doesn’t mean that they are free—it depends on your plan. In order to encourage more people to have health insurance, there is a tax penalty if you don’t have health insurance coverage. It is usually 2.5% fee of your yearly household income or $695 per person ($347.50 per child under 18). You pay whichever number is higher. By more people having health insurance, it helps to provide cost-sharing to the health insurance companies. This means that more people that have health insurance but don’t use it to the extent that others do allows health insurance companies to provide services to all at a lower cost because part of their expense of covering the high users group is being offset by the premiums from those who don’t use their insurance as frequently.
There are online programs or independent insurance agents that can help find a policy that is right for you if you need insurance and don’t have it. There are three main things that you should focus on if you are looking for insurance. Find out from your doctors which plans they are accepting. If one or more of your doctors isn’t accepting any of your insurance plan options, then you might want to consider a plan that will reimburse you for out-of-network providers. It is important to make a list of the services that you and your family use, find out which plans will cover them and the costs of those plans. It is essential to do a side by side comparison of plans looking at the premiums, deductibles, out-of-pocket maximums and coverage to determine which plan will best work for you.
Be sure to look at all of your options prior to selecting a plan. It can take a significant amount of time on your part to gather all the information, but the end result will be more beneficial than if you don’t. Health insurance is complicated, but it is definitely a necessity.