There are many factors to think about when choosing a health plan for you and your family. Will you have access to your regular doctors? Will it cover the services and medications you need? And, maybe most importantly, how much will it cost?
Whether you’re choosing one of the plans offered by your employer, or buying health insurance on your own, it’s important to compare all of your options and get an idea of how much you will pay. Remember, your monthly premium isn’t the only cost to consider. Your plan may also have deductibles, co-payments, co-insurance, and other cost-sharing features. Make sure you understand all of these before you make a decision.
So, what do you need to know before choosing a plan? Start by asking these questions:
What Types of Plans Can I Choose From?
Many insurers offer a range of different plans, including Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Point of Service (POS) plans or Exclusive Provider Organizations (EPOs). Each of these plans has its own structure, with different access to providers and different types of costs. You can learn more about them by reading Alphabet Soup of Plans.
A Note About High Deductible Health Plans
Many employers now also offer high deductible health plans (HDHPs). These plans have low monthly premiums, but in exchange, you will have to meet a higher deductible – the amount you must pay before your plan begins paying for your care. There are ways to help manage healthcare costs under these plans. Many HDHPs include special health savings accounts or health reimbursement arrangements, where you can set money aside just for your health costs. Learn more about HDHPs by visiting our article on Understanding High Deductible Health Plans.
How Much Will I Have to Pay?
Almost every type of health plan involves “cost-sharing,” which means that you and your insurer split the cost of your care. Your share of the cost will depend on the type of plan and whether you use a provider who is in your plan’s network. If you go “out-of-network” you may have more providers to choose from, but you will usually pay more.
How much are the premium and deductible?
Most health plans require a premium payment. This is the amount that you pay to buy and maintain your health plan. If you have health coverage through your job, your employer may pay some, or even all, of the premium. Usually, your employer automatically deducts your share of the premium from your paycheck and forwards it to the health insurer.
Most health plans also have a deductible. This is the amount that you will need to pay out-of-pocket before your plan begins paying for services.
Keep in mind that you may have separate deductibles for different types of coverage. For example, if you meet your deductible for medical services like doctors’ visits, it may not count toward your deductible for prescription drugs. Make sure to read the plan description (available from the health plan or online) so that you understand how much you may have to pay.
The premium and deductible costs are set at the beginning of each plan year, which may be different than a calendar year.
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What other costs will I have?
In addition to the premium and deductible, you may have to pay:
What else affects my costs?
It’s important to understand allowed charges, because if you visit an out-of-network provider who charges more than your plan allows, you will have to pay the difference. This is known as “balance billing.” And that’s in addition to your deductibles, co-payments and co-insurance.
Meeting Your Deductible
Not all of your out-of-pocket costs will count toward your deductible. For example, co-payments usually are not counted. And, if you use an out-of-network provider, only the amount that your plan would have paid for the service counts towards your deductible.
Here’s an example. Let’s assume that you have not met your deductible and:
o You visit an out-of-network provider who charges $100
o Your plan’s allowed charge is $80
o Your co-insurance is 20%, and your plan pays 80%
First, you will need to pay the provider the full $100, because your plan has not begun to cover services yet. But, not all of that $100 will apply to your deductible.
If the deductible had been met, your plan would have paid $64 (80% of the $80 allowed charge). So in this case, only $64 out of the $100 you paid counts toward your deductible.
If you have met your deductible, your plan’s share would still be $64. You would pay $16 (your 20% co-insurance for the $80 allowed charge), plus $20 (the difference between your plan’s allowed charge, and what the provider charged): a total of $36.
You can learn more in our article on Cost-Sharing.
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What if I Go Out-of-Network?
It’s also important to think about whether you will stay in your plan’s network, or go outside the network for care. If you choose to go out-of-network, your costs will usually be higher.
Some health plans, such as HMOs and EPOs, may not pay for any out-of-network care. You will have to pay the entire cost out of your own pocket.
Other types of plans may pay for some out-of-network care, but they use different methods to decide how much to pay. They may:
You can learn more by reading our article on the role of Medicare in out-of-network reimbursement, and by consulting plan documents, contacting a plan representative, or asking your employer’s human resources department.
What Does the Plan Cover?
Finally, before you choose a health plan, it’s important to know whether it will cover the doctors, treatments and medication you need. So, make sure you find out:
Your Action Plan: Know the Costs and Benefits
Choosing a health plan is a big decision. Before you enroll, make sure you know what’s covered, and what it costs.
You can also learn more health insurance basics by consulting these Reimbursement 101 articles:
And most importantly – remember that you are your own best advocate. Asking questions up front will help you find the plan that best fits your needs and your budget.
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