The Quagmire of Health Insurance
Brace yourselves, kiddies, because THIS is pretty exciting stuff!! Who doesn’t love to talk about insurance??
Most of planet Earth.
However, it’s something that can make a major difference in your life if you run into a health issue, even a fairly minor one, as I’m sure many of you are well aware of. With the onset of the Affordable Care Act (ACA), commonly referred to as ObamaCare, the opportunity for people who previously could not access healthcare has been expanded greatly. It doesn’t work for everyone, (what does?) but it has certainly had an impact on the number of people who are able to get some sort of coverage if they choose to. But before you can even decide which plan to purchase, you need to understand the basics of insurance and what your particular needs are.
It’s a confusing topic for most people, in every industry, at every level, so if you’re confused, you’re not alone!
What I’m going to do is cover just the basics here. It’s crucial that you do your research or speak with someone one-on-one for your particular situation. There are some good resources online, including a guide from US News that shows you what to consider when you’re deciding. The ACA website also has some good information, but just know that if you request plan information, you will be inundated with phone calls from providers from all over the country. And I do mean inundated, so keep that in mind.
The main coverage people pay the most attention to is medical. Medical insurance is used for things like preventive care, injuries, illnesses, non-elective surgery, ER visits and ambulance rides.
Vision insurance will cover annual eye exams, prescription glasses, contact lenses and some basic diagnostic services. However, if you have an eye injury or need surgery, those particular services often fall under medical coverage and not vision.
Dental coverage usually includes cleanings and some basic orthodontic needs such as fillings, crowns and braces.
Plans can vary wildly from provider to provider on what exactly can be claimed under their policies, so you’ll want to make sure you have detailed information on the plans you’re considering. What tends to confuse most people though, is trying to understand the differences between deductibles, co-pays, premiums, networks and coinsurance and how they can affect what you may ultimately pay out of pocket. Let’s use an example to illustrate what all of these pieces mean and why they’re important.
Our sample plan is designed as follows:
Monthly Premium for an individual is $200.
Coverage in/out of network 80/50
Deductible is $1000
Co-pays are $30
Out-of-Pocket Max is $3000
Now, what the heck does any of that mean?
Premiums - $200
This is the fixed, monthly cost you will pay for your insurance, just like a car payment. If your insurance is provided by an employer, they will often cover part of the monthly premium.
In/Out of Network
What does “80/50” mean in our example? It means that for this particular plan, if you receive a service that is covered by the policy, then if you select a doctor that is in the plan network, those services will be covered at 80%. That means you will be responsible for the other 20%. If your doctor is not in the plan network, the plan will only cover 50% of the services and you will be responsible for the other 50%. The most common way to determine whether or not a doctor, dentist, ophthalmologist or any other specialist is in the network or not is to use your insurance provider’s online portal.
Deductible - $1000
The deductible is an amount that you will have to meet during the plan year before your insurer will pay for any claims. In this example, you will have to pay for $1000 worth of services before the insurance company will start covering you at the 80% or 50% levels we discussed earlier. So, let’s say you have a car accident and your bills for that end up totaling $7000. You’re responsible for the first $1000. Then, the insurance company will pay your claims at 80% and you will be responsible for the other 20% until you reach what is called an ‘out-of-pocket maximum, which we’ll discuss next. Your total bill is $7000, you handle the first $1000, which leaves $6000. Insurance will cover 80% of that ($4800) and you have to cover the balance of $1200. You can make payment arrangements with the doctor, hospital or clinic, use a credit card, use your Health Savings Account or pay up front.
Out-of-Pocket Maximum - $3000
The out of pocket is the maximum amount in any given year that you will have to pay for medical expenses under your plan. In our example, you’ve paid a $1000 deductible and then you’re responsible for another $1200, which is the 20% the insurer isn’t paying for. So far, you’re out $2200. So - and let’s hope NONE of this happens - what if you have another $7000 accident? Is that another couple of thousand that you have to pay? Luckily, that answer is no. Your deductible is now out of the way and the insurer is going to cover your expenses at 80% right away. You’re responsible for that other 20%, but ONLY until you have paid out a total (for the year) of $3000, which is your out-of-pocket max. You’ve paid $2200 as a result of the first accident, so you only have $800 to go before your expenses are covered at 100%.
This is only a very basic explanation of how insurance plans work and you may still have plenty of questions. There is great information online and also with the HR department if you end up at a more corporate position and they offer these benefits.
I hope this helps to clear the fog at least a little bit!