There’s no way around it. Health insurance is confusing! How do you pick the right plan? Why did you get that unexpected bill? What are you paying for after all? We’re going to break down some of the more confusing parts of health insurance in this health insurance 101 article.
HMO vs. PPO
Most plans operate as either HMOs or PPOs. HMOs are health maintenance organizations. Generally speaking your monthly premiums will be lower, but you must use an in network physician. Should you need to go out of network, except for a true medical emergency you will pay for the entirety of the costs. HMOs only work with in network doctors. You can however apply for a gap exception under specific circumstances, but be warned, there will be a lot of paperwork!
PPOs are preferred provider organizations. They offer more flexibility but generally speaking with higher monthly premiums. You will pay less seeing an in network doctor, but you will still have coverage with an out of network doctor. An in network doctor has agreed to accept whatever amount your insurance has agreed to pay for a given service. An out of network may charge more and generally speaking, your coinsurance will be higher. You need to check these terms with your specific plan. Additionally with a PPO, you will be able to arrange to see a specialist on your own. An HMO requires that your primary care physician arranges any visit to a specialist.
Health Insurance OOP Costs
No matter which route you choose will have several out of pocket costs to be aware of. They can be a little confusing as well. Specifically Premiums, Deductibles, Coinsurance, & Copays. You should also be aware of Out of Pocket Maximums. How these costs are structured are entirely dependent on your plan. Some are definitely more common than others but you need to check with the specifics of your plan.
First you have a monthly premium. This is the amount you pay on a monthly basis to keep your insurance active. If your company has more than 50 full time employees, they are required to offer health insurance and contribute at least towards at least 50% of the monthly premium. This is why COBRA is so expensive. COBRA requires you to pay your portion plus your employer’s portion and possibly a 2% administrative fee.
Deductibles are where things can start to get a little confusing. Your deductible is the amount that you have to pay out of pocket before your insurance kicks in. They can work in a variety of different ways.
First, some plans may have copays for some services even before you meet your deductible. Meaning that instead of paying the full amount, you will be responsible for a set copay before you meet your deductible. For example, a $25 copay for a doctor’s visit.
Other plans may not cover anything until you meet your deductible. Meaning that you will be on the hook for the full costs until you meet your deductible. You need to check the specifics of your plan for further details.
There can also be deductibles for prescriptions. Sometimes your medical and prescription deductible will be combined so that medical expenses and prescription expenses will go towards meeting your deductible.
The last thing to discuss with regards to deductibles are individual and family deductibles. If you are on a family plan, you will have both an individual deductible and a family deductible. This is actually to make things less expensive for you. If you are on a family plan and you have met YOUR individual deductible but NOT the family deductible, your insurance will kick in and you will be responsible for copays/coinsurance even if the rest of the family is working towards their individual deductible. HOWEVER, even if you have NOT met your individual deductible, but the FAMILY deductible has been met, your insurance will kick in and you will only be responsible for copays/coinsurance. Same principles apply for OOP Max. We’ll touch on that momentarily.
Additionally, there are several services that will be covered at no cost even before you meet your deductible. Check out healthcare.gov for further details.
Copays & Coinsurance
Insurance is basically cost sharing. When you have insurance, you will pay for a portion of your healthcare costs and your insurance will pay for a portion of your healthcare costs. The exact terms are determined by your specific plan. You may be responsible for copays, coinsurance or a combination of both.
Copays are fixed amounts for a given service or item. For example a visit to a specialist might be $50 and a trip to the ER might be $250. Or a certain type of medicine might be $5, $10, etc… You can usually find your copays on your insurance card.
Coinsurance can be a little trickier. With coinsurance you are responsible for a given percentage of the costs with your insurance paying for the remaining percentage. Usually for in network services, your carrier will cover 60-80% of the costs. If you are on a PPO, seeing an out of network provider your insurance will cover a smaller amount of the costs. As always, check your plan for specific terms.
Health insurance plans also have out of pocket maximums. Basically this is the max that you can pay before your insurance takes over entirely. So, if you were to need a very expensive surgery, say $150,000, you would only need to pay your deductible and then your coinsurance UP TO your out of pocket maximum. After that, your insurance is responsible for the remainder of the cost.
For the 2021 plan year: The out-of-pocket limit for a Marketplace plan can’t be more than $8,550 for an individual and $17,100 for a family. This is really why insurance is so important. Major health services can be astronomically expensive. Even though insurance comes with several out of pocket costs, having those maximums can protect you from crippling medical bills.
Should you have any questions whatsoever, please feel free to contact us here at iHealthBrokers at 888-918-0518 or schedule a call today.
Jesse Smedley is the Principal Broker for iHealthBrokers and the founder, president, and CEO of Smedley Insurance Group, Inc. and iHealthBrokers.com. Since the inception of SIG in 2007, Jesse has been dedicated to helping people save money on their health insurance by providing them with resources to educate themselves on all their health insurance options, both under age 65 and Medicare beneficiaries. He is featured in many publications as well as writes regularly for expert columns regarding health insurance and Medicare.