How to Choose a Health Insurance Plan
On March 23, 2010, The Affordable Care Act, or ACA as it is best known, was signed into law by President Barack Obama. The law changed the landscape of health insurance in this country by requiring that most U.S. citizens and legal residents have health insurance or face a penalty if they remain uninsured.
One purpose of the law was to ensure that everyone has access to coverage and no one can be denied, even those with pre-existing conditions. ACA also dictates, in large measure, the premium levels that can be charged for the insurance, making sure that there is less disparity between male and female premiums as well as younger versus older Americans. No longer can the actual health of the individual determine the premium they will be charged for their individual health insurance.
Essential health benefits were also added to include a broad range of mandated benefits that must now be included in all health insurers plans. Because these benefits may not have been included in all health plans previously, the additional benefits may increase premium costs.
There are 10 categories of benefits that must be included in all policies offered in the small group and individual market.
- Maternity Care
- Rehabilitative Services
- Pediatric Services
- Mental & Behavioral Treatment
- Preventive & Wellness Services
- Laboratory Services
- Prescription Drugs
- Ambulatory Patient Services
- Emergency Services
The implementation of this historic law has been unveiled in multiple stages. The biggest impact was felt on January 1, 2014 when the portion of the law which mandates that all Americans have health insurance or be subject to a yearly penalty went into effect. The penalties were designed to be the lowest at the inception in 2014 and then rise in years after. The following fees have been imposed in 2014 and 2015 and will rise again in 2016.
• $95 for each adult and $47.50 for each child, but not more than $285 total per family.
• Or 1% of your family’s yearly taxable income.
• $325 for each adult and $162.50 for each child, but no more than $975 total per family.
• Or 2% of your family’s yearly taxable income.
2016 and beyond
• $695 for each adult and $347.50 for each child, but no more than $2,085 per family.
• Or 2.5% of your family’s yearly taxable income.
Since 2014 there has been an emphasis on educating the uninsured about the importance of getting health insurance and making sure that they are being a good consumer when choosing their plan.
To accommodate those that do not have insurance available to them through an employer, or who have chosen to remain uninsured, the federal government has created a marketplace concept where private insurers are invited to sell individual policies to those seeking coverage on the open market. A handful of states adopted their own state marketplaces. However, most states decided to let the federal government be responsible for setting up an online marketplace where residents of their state can purchase their health insurance. To offset some of the premium costs to low income individuals and families there may be help available in the form of subsidies that many can qualify for, to help in the cost-sharing expense of the premium.
Starting the process of how to find a health insurance plan for yourself and your family can be a daunting task. The cost of health care continues to rise so it’s important to keep your family protected and select a plan that fits your individual needs and budget. Knowing what your needs are before you begin your search will alleviate a lot of confusion. It’s important to remember that the main goal of health insurance is to protect your family from a catastrophic loss should you or a family member become ill. Deciding what you can really afford to pay out of your own pocket is key when beginning your search.
ACA requires that all plans sold in the small group and individual markets fall into one of four different tiers – platinum, gold, silver and bronze. These tiers are based on a minimum percentage of the health care costs that need to be covered for an average person, otherwise known as the actuarial value. As the tiers suggest, the higher the metal the richer the benefits and the higher the premium cost. The concept is relatively simple, if you are looking for a benefit rich plan, the platinum or gold may fit the bill. Those that determine they only need basic catastrophic coverage would look more closely at a Bronze.
Although hybrid plans continue to pop up throughout the marketplace, as insurers try to differentiate themselves from the pack, it’s important to have an understanding of the basic types of plans and what coverage they provide. Although all plans offered by insurance carriers must fall within the actuarial values of the four tiers listed above, each comes with varying types of benefit levels and price tags. Many consumers find that as their needs change over their lifetime, so does the type of health plan they select.
Taking some time to understand the basic types of plans being offered is necessary to determine how to find a health insurance plan which will work the best for you. Don’t buy the Cadillac plan with all the bells and whistles if the Economy plan will cover all of your needs.
Following are the most popular types of plans and how they work:
Qualified high deductible Health Plans(QHDHP): These plans tend to have deductibles starting at $2000 or higher and have no first dollar benefits. This means that the entire deductible must be satisfied by you before any plan benefits are paid. Generally, first dollar benefits such as office and prescription drug copays are unavailable on a qualified high deductible plan. If you have family coverage your deductible will generally be double the cost of the single deductible. Because the insured takes on more financial risk with this type of plan they are rewarded with lower monthly premiums. This type of plan can be paired with a Health Savings Account where tax free money can be put aside to use for non-covered expenses such as the deductible or prescription drugs.
Deductible/Coinsurance plans: This type of plan has a very simple concept. You must meet your deductible prior to any benefits being covered under the plan. Once you meet your entire deductible then the plan will pay at a preset coinsurance level, generally between 70 percent to 100 percent until the out of pocket maximum is met. Then the plan pays at 100 percent through the rest of the calendar year. Although this plan loosely resembles the qualified high deductible plan the difference lies in the fact that prescription drug copays are available on a deductible copay plan but they are not on a QHDHP. Also a health saving account cannot be used. Prescription drugs are generally covered under copayments.
Copay plans: These plans are by far the most benefit rich type of plans available for sale, and come with the highest price tag attached. Minimal copays, generally in the $25 – $50 range, are charged for routine treatments such as office visits, lab work, diagnostic tests, and some outpatient procedures. Deductibles must be met only when major medical treatment is needed such as inpatient hospital stays, surgeries, and cancer treatments. Prescription drugs are generally covered under copayments. Copay plans could be considered Cadillac plans because of their rich benefits and low financial risk of loss for the insured.
Once you know the basic plan options, the next step is determining how to choose a health insurance plan that will work the best for you.
Following are some points to ponder when deciding how to choose a health insurance plan for you and your family.
What can you afford to pay out of your own pocket?
This is probably the most important question you need to ask yourself in determining what type of health plan you should choose. When looking at your overall budget you will need to not just look at the monthly premiums that you will pay but also any out of pocket maximum expenses that will be your responsibility as well. After you have determined what your monthly premium will be, multiply it by 12. This will be your yearly expense for your premium. Next you will need to look at the out of pocket maximum for each plan that you are considering. This is the total amount that you would have to cover out of your own pocket if you have a major health issue. If you are also covering a family make sure you use the family maximum out of pocket in your calculation not the single. Add this amount to your total monthly premium. The total is the maximum that you could be responsible for in a year.
This will give you a base to start with in determine the type of plan that you can afford. Again, looking at the metal tiers of platinum, gold, silver and bronze. If your budget is tight, look at your options in the lower priced silver and bronze tier.
What are the must-have benefits?
Are you generally healthy or do you have chronic, ongoing health issues that land you in the doctor’s office frequently? Do you only see your doctor for a once a year physical? Just like your auto or home owners insurance, its necessary to do a yearly audit of current health insurance policy and your true needs when it comes to the benefits you select.
Health insurance should be thought of as a commodity that protects you from a catastrophic loss in the event of a severe health issue such as cancer, heart disease or a stroke. Because of ACA regulations, all health plans must provide the minimum essential benefits described previously. But you will want to determine what types of other benefits you are looking for in a plan. Do you feel office and drug copays are necessary or can you pay these costs out of your own pocket?
If you are younger, generally healthy and have no costly medications it may be in your best interest to look for a health insurance plan that offers less first dollar benefits and a higher deductible. A qualified high deductible or a deductible coinsurance only plan may be right for you. It will cover you for all major medical issues but you will be responsible for the small things. These types of plans will offer lower monthly premiums.
Decide what benefits you feel are essential to meet your needs and then search for a plan that provides these benefits. Having a plan with a low deductible and a lot of copay options may look like the best plan but if you are healthy and rarely go to the doctor you are simply paying for extras that you don’t need.
Can I keep my doctor and local hospital?
As health care costs have soared in recent years, insurance carriers have searched for ways to reign in some of the costs and be able to pass along the savings to those they insure. One way to do this is to set up a network of doctors and hospitals that contract directly with the insurance carrier. The doctors charge an agreed upon fee for services rendered to their patients that the insurance company steers in their direction. Generally, the more people the insurance company is able to direct to the doctors in the network the better discounts the insurance company receives on claims billed by the doctor or hospital.
This concept works well for providing claim cost control and is a win/win situation for those that stick with in-network doctors. However, it can cause an adverse effect for people that have to change doctors to stay in the network or to risk having their claims paid at a higher out of network charge. This will mean a higher charge for the same bill and more out of pocket expense for the insured.
There are different levels of network contracts that insurance carriers and doctors enter into. HMOs are generally a more restrictive contract and members are assigned a primary caregiver who determines the overall care of the patient and whether they should be referred on to a specialist for further attention. This arrangement provides the high cost savings for the doctor and insurance carrier, however, the patient has less decision making authority over their care.
PPOs have become the most popular type of contract because they still provide cost savings but allow the patients to have much more control over their own care. As long as they remain in the PPO and use doctors in the contracted network they will receive the discounted pricing. They can see any doctor or specialist in the network without needing a referral.
EPO is the abbreviation for Exclusive Provider Organization. This is the most exclusive type of PPO. The patients are only allowed to use doctors within the PPO organization. They are not allowed to go outside the network. If they do, there are no out of network benefits. The risk is greatest in situations where someone would need to go to a non-network provider for specialized care. The patient would be responsible for the entire claim.
Navigating the confusing road of finding a health insurance plan can seem overwhelming, especially for those that have been recently uninsured. As you begin your research and start looking for answers to your questions, know that there are many websites and consultants that are willing to lend a hand in your search. They can provide counseling and feedback to all of your questions to ensure that you are choosing the right health insurance at the best price possible.