Health insurance is an essential component of your financial wellbeing. But it can be confusing to understand without a guide or some support. There are key terms that you need to be familiar with as they will also line up to when insurance pays versus you being responsible for the medical services you receive.
This guide is intended to provide an overview of how to acquire health insurance, what key terms to learn and examples of what kind of expenses you should plan for.
Getting health insurance
Most Americans get their health insurance plans through their employer. But in 2010 the Affordable Care Act was established. The ACA provided another way for people to get health insurance and potential financial support to help pay for care. Medicaid programs are offered state by state to provide health insurance for financially impoverished. Additionally, there are programs like TRICARE for armed service members and Medicare for Americans who're 65 years or older.
Shopping for health insurance can seem challenging because plan enrollment isn't available 100% of the year. The first step in your health insurance search should be determining if you're able to enroll.
Health insurance plans for individuals not eligible for Medicare
There are specific times of the year that plan enrollment windows are open, for example Nov. 1 through Jan. 15. Employer-provided plans will typically have an annual enrollment period for several weeks towards the end of each year as well.
Qualifying events, like a change to marital status or a job change where you lost health insurance, typically provide a window of time, typically 60 days from the event, for you to enroll outside of the normal enrollment period.
If you're approaching an enrollment period or qualify for a special enrollment period, you'll want to read our step-by-step guide on shopping for health insurance.
If you're approaching 65 or are eligible for Medicare
Medicare Open Enrollment takes place from Oct. 15 to Dec. 7. Medicare typically is for those age 65 or older. But you may be eligible if you're disabled or have end-stage renal disease or ALS, also known as Lou Gehrig's disease. Read our guide on Medicare basics to learn more about the parts of Medicare and how to plan for future costs.
If you're Medicaid eligible
Medicaid program eligibility is income and needs based. Depending on your state, you may be able to enroll in Medicaid or the Children's Health Insurance Program (CHIP), if you earn less than a certain percentage of the federal poverty level.
Each state sets thresholds on financial eligibility although most states have adopted the guidelines set out by the ACA's Medicaid expansion. If you live in a state that uses the expanded guidelines, you may be eligible for Medicaid if your income is less than 138% of the federal poverty level, or about $20,120 for an individual. Family size is considered as part of the eligibility calculations as well. To see if you are eligible, visit healthcare.gov. See note 1
Health plan types
There are some differences in plan types and how you can use your health insurance that are important. Some plan types are administered through a primary care doctor that operates as a quarterback for your medical needs. Others plans may allow for you to seek out the care you want without going through another doctor first, but they may cost more in premium. Learn more about the more common plan types:
Health Maintenance Organization, or HMO
HMO plans are health insurance plans that typically limit care and services to a specified network of doctors. People with HMO plans will have a primary care doctor for general health needs and will refer out to specialists when necessary. These plans typically don't pay for care received outside of the plan network unless it's for emergency or urgent care.
Preferred Provider Organization, or PPO
PPO plans are like HMO plans in that they have a network of doctors that will provide care at discounted rates. But PPO plan holders can receive care outside of that network and the plan will pay for covered services, although the cost may be higher. PPO plans don't require plan holders to go through a primary care doctor or require a referral or prior authorization to see a specialist.
Point of Service
Point of service plans are like a blend of HMO and PPO plans. Similar to HMO plans, you will use a primary care physician for referrals to specialists. And like a PPO plan, you will have a network of doctors that will provide care at discounted costs. You will be able to receive care outside of the plan network at an increased cost.
Key terms
Premium
That's what you pay, typically on a monthly basis, for your health insurance. If your coverage is through your employer, it generally will be deducted on a pretax basis. If not or if you're self-employed, you may be eligible for special tax benefits based on the premium you pay for yourself or employees.
If you get your health insurance plan through the ACA marketplace, you may be eligible for premium subsidies or financial assistance to help pay your premium. Eligibility is needs based and is determined by income and family size. For more information or to see if you're eligible for premium subsidies, visit healthcare.gov. See note 1
Deductible
This is what you may have to meet before your insurance begins to pay. For example, if you get medical care that costs a total of $4,000 and you have a $1,000 deductible, you'll pay your deductible and your insurance policy will pay the difference. This is a simplified explanation, for more specific details on your coverage, review your policy or benefits information.
Once your deductible is met for the year, your insurance will pay for your medical care needs for the remainder of the plan year. But you may still have copayments for specific services if your plan requires them. At the beginning of the next plan year, your deductible is reset.
Many insurance policies cover the cost of preventive care — such as immunizations, yearly physicals, screenings and mammograms — without having to meet your deductible.
Copayments
This is a set cost you'll pay every time you visit the doctor, get prescription medications, visit the emergency room or use health care services or supplies. The copay will vary for different services. For example, a doctor's visit may be $25, a trip to the ER, $100, and a generic medication, $8.
Coinsurance
After paying your full deductible, you may be responsible for a portion of your health care costs. For example, you may pay 10% or 20%, with your insurance covering the rest of the cost of covered care.
This shared approach toward medical expenses will continue until you hit your out-of-pocket maximum.
Out-of-pocket maximum
Every dime you pay in deductibles, copayments and coinsurance payments counts toward this figure. Once you hit the maximum, your insurance covers the rest. Like your deductible, this maximum is for the plan year and will reset at the beginning of the next plan year.
Many plans that are offered on the ACA marketplace have equivalent deductibles and out-of-pocket maximums. Typically these plans have more affordable premiums and are categorized typically as bronze or silver plans. But the average deductible for medical and prescription benefits of a bronze plan is more than $7,000. You may not feel the impact of monthly premiums as much. But your insurance plan wouldn't be responsible for any costs until the deductible is met — aside from preventative services.
In network and out of network
Most health insurance plans will have negotiated pricing for medical services with various care providers also referred to as being in network. If you receive care from a provider that is not part of the insurance plan's network, or out of network, the medical services you get won't be at a negotiated rate and will likely be more expensive.
Your plan will likely have different coverage limits for in-network and out-of-network costs as well. For example, your coinsurance amount for in-network services may be 20%, but your share may increase to 30% or 40% if you receive care from an out-of-network provider.
Out-of-pocket costs
Here are a few examples of common medical services and the associated costs, including insurance coverage and what you may be able to anticipate for out-of-pocket expenses:
These examples are generalized, and actual costs may vary depending on your insurance plan, deductible, copayment, coinsurance and other factors.
Preventive Care
Preventative care usually refers to services like a yearly physical exam or vaccinations and health screenings. Most insurance plans cover preventive care services at 100% without requiring a copayment or coinsurance.
Your cost: Typically, you would not see an out-of-pocket cost for these types of services.
Primary Care Visits
Routine checkups with your doctor are referred to as primary care. Insurance plans will have varying costs depending on your plan or type. Some plans require a copayment or coinsurance while others may offer free or discounted visits as part of the plan.
Your cost: You would be responsible for your copayment, like $20 to $50 or more depending on the plan, or coinsurance, which may be a percentage of the overall cost of the medical services provided, for example 20%.
Specialist Consultations
If you need specific treatment or care from a specialist, such as a dermatologist or cardiologist. Depending on your plan type, you may need to get prior authorization to see a specialist. Usually that is handled by seeing your primary doctor first. Your coverage will vary based on your plan. Consultations may require a copayment or coinsurance, or the plan might have a separate deductible for specialist visits.
Your cost: You may be responsible for a copayment, coinsurance or payment towards your deductible, which can range from $30 to $100 or more, depending on the plan.
Emergency Room Visit
If you need urgent medical care for severe injuries or sudden illness, a visit to the emergency room may be necessary. Emergency room visits are typically covered, but insurance plans often have a separate deductible and higher coinsurance or copayment for such services.
Your cost: You can expect coinsurance costs, which can add up to several hundred dollars or more, depending on the plan. According to research by Consumer Health Ratings, the average out-of-pocket cost for patients under 65 with private health insurance was $1,682.
Hospital Stay
If you are admitted to the hospital for inpatient treatment or surgeries, your plan will typically cover fees for the hospital stay itself, doctor consultation and any treatment you may require.
Depending on your plan, hospital stays may have a separate deductible and coinsurance amount. Your plan also may have a fixed limit to daily hospital benefits.
Your cost: You will be responsible for your deductible, coinsurance costs, and any additional costs not covered by insurance up to your out-of-pocket maximum limit. Depending on the length of stay and services received, out-of-pocket expenses can range from a few hundred to several thousand dollars. It may be reasonable to assume a hospital stay may cost you at least your deductible amount and potentially up to your out-of-pocket maximum limit.
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