If you find health insurance confusing, join the millions of others who feel the same way. There are many different terms and concepts to get used to, especially if this is your first time in the health insurance marketplace. Finding the best plan for you and your family isn’t always a simple process, even after Obamacare went into effect. The idea of it seems pretty simple – pay an insurance company a set amount of money each month to help cover your medical bills – but now there are deadlines and marketplaces and criteria you have to meet in order to qualify for ACA-approved policies.
Hopefully the following information will help smooth out the facts and make them easier to digest.
Shopping for the Best Health Plan
The ultimate goal for any health insurance consumer in America is to get the best policy possible for the best rate available. Unfortunately, this is easier said than done. You might as well get used to the concept that you trade one cost or benefit for another, so there’s always a win-win situation. For instance, if you want a great network and access to lots of covered services, you’re going to have spend a pretty penny on your monthly premium.
On the other end, you can find a low-priced premium and deductible and settle for a smaller network and less coverage and available services under your plan. There’s a lot of mixing and matching you can do to create a customized plan to your liking. But for many, too many choices can get really confusing.
The top priority of insurers is to make money, so they broker deals with healthcare providers. They lock in prices, compare how much plans will pay and then create plans that will ensure a profit for the insurance company. There’s no way to “beat the house”, but you can at least get something out of it on your end – affordable premiums and exceptional coverage options.
The best way to ensure this is to learn how the the costs and coverage work, so you can find a way to get the best of both worlds. The industry jargon will crack you up a bit, so it’s necessary to become familiar with it.
Health Insurance Jargon 101
Do you know what it means when an insurer says terms like out of pocket costs, copays, premiums, deductibles, out of pocket maximums, dollar limits and coinsurance? How about coverage terms like out of network, in network, covered benefits, health plan types, health saving plans and drug formularies? If not, then you’re going to end up caught up in the terms, rather than focusing on the bigger picture.
You need to learn the definition of these terms and identify how they’re all connected. This will help you determine which benefits to trade-off, so you can get exactly what you need for you and your family at a price you can afford.
Terms to become acquainted with include:
- Premium: This is how much you have to pay monthly to the insurer. When your premium is higher, this normally translates to lower out of pocket costs, including coinsurance and deductibles.
- Deductible: This is how much you’ll have to spend out of your own pocket before the year is over, in order for coinsurance to kick in. Some plans will cover 100 percent, but most will only pay a portion, leaving you to pay coinsurance for the remainder of the year. Your deductible does count towards your out of pocket maximum.
- Copay: This is a fixed amount you’ll have to pay for any health service you receive that is covered under your plan. This isn’t subject to a deductible. From day one, you will have to pay a portion of your service or prescription. Your copay will go towards meeting your deductible.
- Coinsurance: This is similar to copay in that you have to a portion of your medical bill. However, this doesn’t start from day one; it normally begins after you’ve met your deductible. For example, if you spend a night in the ER then some plans will only pay 80% of those costs and you are saddled with the remaining 20%. If you have a family that needs insurance or if you’re sick, it’s best to go with a policy with low copays, deductibles and great coinsurance coverage, versus a low premium.
- Out of pocket maximum: This determines the maximum you will have to pay for covered services out of your own pocket within a 12 month period. Once you have met the max, the insurer pays 100 percent of the covered costs.
- Actuarial Value (AV): This is the average amount an insurer will pay everyone on your plan. It’s just an estimation and holds no real value. You can use this to determine which plans qualify for cost assistance when shopping in the marketplace. It’s pretty much the projected amount of shared expenses based on the average use of a particular plan.
- Dollar limits: This is how much an insurer will pay you for care.
- Networks: Every plan has a network of healthcare providers you can choose from. Going to a provider outside the network means you won’t be covered for services rendered or, at the very least, will have to pay a higher percentage of costs then if you saw a provider in your network.
- Drug formulary: This is a network of prescription medications that are covered under your plan. Pay attention to the copays for the drugs.
Determining Your Medical Needs for Health Coverage
Aside from knowing the jargon, you need to understand how to calculate what you and your family need. This can be done by anticipating your income for the next year and any medical needs you know require attention, or potential emergencies that could arise (like getting injured during a planned summer trip or annual winter ski vacation).
Once you factor in your income for the next year, you need to subtract your expected expenses to see how much you have left over. This figure is a good place to start when determining how much premium and deductible you can afford. In most cases, a higher deductible will result in a lower premium and vice versa. Make sure the premium, deductible and out of pocket maximum is within your budget before enrolling in any insurance plan.