What You Need to Know About the Cost of Today’s Health Insurance
So, please read
on. It will help you understand the
dollars and cents of health insurance and how to save money, while getting the
protection you and your family need. In
fact, when you get to the end of this article, you’ll find 3 Simple Steps that will
help you buy the best policy at the best price!
But first let’s talk dollars…
How much will
health care really cost when I have insurance?
Your total annual
cost for health care services that are covered by your health
insurance policy equals your Annual Premium PLUS Deductibles PLUS Copays PLUS Coinsurance, as limited by Out-of-Pocket
Maximums. Confused already?
…it’s explained below! Of course, the
cost of any health care services that are not covered (excluded) by your health insurance will
be your responsibility and paid by you in addition
to the amounts above – in particular, this includes all medical costs you incur
after you exceed the policy’s lifetime 
maximum,
should that happen.
An important benefit
of health insurance that many people overlook is that insurance companies
negotiate lower costs for services from network providers. People without insurance will generally pay
the full cost billed by providers; whereas, those with insurance and who use the
provider network will have costs reduced up front to the negotiated
fee. For the insured person, this means
both lower expenses and more services
for each dollar spent.
What do I need to
know about these different Costs?
n Learn about Annual Premiums
The
insurance premium is a fixed amount that the insurance company bills you on a
regular basis for the policy. Many insurance companies will now charge your bank
account monthly by using an auto-debit feature; some will issue quarterly paper
bills. In any event, most policies have
a one-year term, so the total amount of premium you pay over the year is
referred to as the Annual Premium. [Return to Top]
n Learn about Deductibles
The Annual Deductible
is the amount you must pay toward medical services during each year (often the
calendar year) before the
health insurance will pay any benefits.
The deductible can be thought of as “first-dollar” payments toward your
annual healthcare needs. It is important
to note that payments you make for services, which are not covered (“excluded”) by your policy will not count toward your
deductible. In addition, for family
policies the deductible may apply separately to each covered family member (although it is often limited in total
to 2 times the stated deductible). In
other words, a $500 deductible family health insurance policy may actually
require $1,000 to be paid by you before the insurance covers all members your
family. Finally, some policies will pay
for certain services without regard to the deductible – for example
preventative care – and some will apply separate deductibles to specific services
– for example prescription drugs. Note that copays
and coinsurance (as described
below) that you may pay for services that don’t
require a deductible will not
count toward the deductible. Be sure you read the terms of the deductible
provision carefully so you understand how it applies before you buy a policy.
Learn
more about Deductibles and how to Save Money!
n Learn about Coinsurance
The
term Coinsurance refers to the situation
where you and the insurance company share
the cost of a medical service (like a doctor's visit or a prescription). In particular, it usually refers to the
percentage of cost that you
are required to pay after the
plans annual deductible is met. If you use in-network services, your
coinsurance amount will be determined after
network discounts are applied (in other words, a 
network discount will reduce the dollar
amount of your coinsurance). Typically, coinsurance for services from
in-network providers are 10%, 20%, 25%, or 30%; whereas coinsurance for
out-of-network providers are usually 30% and higher (many HMO plans provide no
insurance for out-of-network services at all).
All else being equal, lowering coinsurance percentages will increase premiums,
and visa versa. As a rule of thumb, if
you expect to be an infrequent user
of medical services during the year, a high coinsurance policy will probably
save you money because of lower monthly premiums. If you expect to be a frequent user of services, then a low-coinsurance policy may be
worth the higher premium. [Return to Top]
n Learn about Copays
A copay or co-payment is a fixed amount you must
pay for each use of certain medical services covered by your health
insurance. Copays usually vary according
to the service. For example, a typical
health insurance policy might require the following copays: $25 for your
primary-care physician (often referred to as “PCP”); $50 for a specialist; $75
for an Urgent Care facility; $100 for an MRI scan; $150 for using an emergency
room; $250 for a hospital stay; etc.
Coinsurance and copays will sometimes apply together. For example, a doctor office visit may
require a $25 copay; however, tests or treatments prescribed by the doctor
during the visit could be subject to coinsurance. So a blood test will cost you an additional
$20 if a 20% coinsurance is applied to a $100 network-negotiated price for the
test and lab work.
As with coinsurance, when all else is equal, lowering copays will increase
premiums, and visa versa. As a rule of
thumb, if you expect to be an infrequent
user of medical services during the year, a high copay policy will probably
save you money because of lower monthly premiums. If you expect to be a frequent user of services, then a low-copay policy may be worth the
higher premium.
Learn more about Coinsurance versus Copays
n Learn about Out-of-Pocket
Maximums
Maximum Out-of-Pocket
expense is a very important concept that is often overlooked by individuals who
purchase health insurance. It generally
refers to the maximum coinsurance amount that you are liable for during the
policy year. Since one of the main
purposes of insurance is to limit your overall financial exposure, this is
indeed an important limit. In the case
of serious illness or injury, it is the primary provision that limits your
financial burden. For example, suppose
you purchase a coinsurance policy and are subsequently seriously injured in an
accident, which results in $100,000 of medical expense. The coinsurance percent (whether 10%, 20%, or
30%) has little effect on your total cost.
Instead, the policy with the lowest Out-of-Pocket
Maximum has the greatest value in this situation. So a 30% coinsurance plan with a $5,000
out-of-pocket maximum will have twice the value in this case of a 10% coinsurance
plan with a $10,000 out-of-pocket maximum (even though the monthly premium for
the latter may be higher). …That’s a potential savings of more than
$5,000!
Be
careful when comparing different plans.
The out-of-pocket maximum usually includes the deductible amount, but
sometimes it does not, and usually it does not include your copays. [Return to Top]
So,
which health insurance policy should I buy?
There is no universal
answer to this question. But now that
that you have become better informed about the costs and benefits of health
insurance, you can probably answer the question yourself!
Here are 3 Simple Steps to help
you. Give it a try – You should find it easy enough to do!
1)
Click the link below and print out the
one-page questionnaire (you may need to press your “back” button to return to
this page). Use your answers on the
questionnaire to help you select the right policy from the hundreds that are
available.
Health Insurance Questionnaire
2)
When you are ready to compare
companies, plans, and premiums, simply click on Online Quotes in the side menu bar.
After you enter the requested information, a full set of quotes will be
presented instantly!
Don’t
be concerned by the number of plans that may appear. Having already completed step 1), you can now
filter the results by clicking on the top of the table of online quotes and
selecting criteria that match your needs.
You may narrow down your choices even further by eliminating networks
that don’t include your doctor. Finally,
do a side-by-side comparison of the three to five plans that suit you
best. Now you can choose the best policy
at the best price.
3)
Click the Apply button next to the plan you want. You can complete and submit your application
online. Online applications usually have the quickest turn-around and may not
require any paperwork.
Congratulations!
… With your new-found knowledge
regarding the costs and benefits of health insurance, you can feel good about
the plan you just purchased and the protection it will provide to you and your
family.
Disclaimer: The
information provided above is for general educational purposes only; it is not
intended to be legal advice and does not replace or supplement the terms of any
insurance policy. Our definitions and
explanations may not be the same as those used by insurance companies, their
policies, or their plan documents and brochures.
© Schleh Benefits Resources