« Life & Health Insurance
The following article is reprinted from Consumer
Reports. September 2014.
Health care can be very expensive. Having a baby
costs about $30,000, and so does the average three-day hospital
stay. Health insurance is a way to reduce those costs to an amount
that you can manage by sharing the risk with others. That works
because most people are mostly healthy most of the time, so their
premiums help pay for the expenses of the small number who are sick
Here are the three major questions you need to
ask when picking a plan.
1. What does the plan cover?
Insurance sold to people and small businesseses
must cover 10 essential health benefits." Any plan you
buy, whether through your state's Health Insurance Marketplace or
not, will pay for these services
- Emergency services
- Laboratory tests
- Maternity and newborn care
- Mental health and substance-abuse
- Outpatient care (doctors and other
services you receive outside of a hospital)
- Pediatric services, including dental
and vision care.
- Prescription drugs
- Preventive services (such as immunizations
and mammograms) and management of chronic diseases such
- Rehabilitation services
The rules for insurance provided by large employers
are a little different but the vast majority them will cover the
same set of benefits. To make sure, ask your employer for the Summary
of Benefits and Coverage, a standard form that will state exactly
what the plan covers and doesn't cover.
It's important to know, though that some older
plans may not cover this whole list of services. These are plans
sold to individuals or small business (with up to 100 employees)
that started before the new health reform law took full effect in
2014. Under certain circumstances these plans can be renewed even
though they don't have all the consumer protections available with
newer plans. If you have such a plan your insurance company will
send you a notice about it before the annual renewal date. Then
you can consider whether to keep it or to switch to a new plan.
You pay for health insurance in two ways:
1. The monthly premium that you pay
to purchase your plan.
2. The out-of-pocket expenses you pay when you receive medical
care. Those are some combination of deductibles, coinsurance,
In general, if you pay a higher premium upfront, you will pay
less when you receive medical care, and vice versa.
If you purchase coverage through your state's
Health Insurance Marketplace, you may be eligible for income-based
subsidies that lower the cost of your premium and in some cases
your out-of-pocket expenses.
To make comparison easier, plans sold to individuals are grouped
in standardized metal tiers with various combinations
of premiums and cost sharing:
Bronze plans cover 60 percent of the average member's
total health care costs and thus have the lowest premiums but the
highest out-of-pocket costs. Individual deductibles for Bronze plans
in 2014 average $5,081, according to an analysis by HealthPocket,
a private health insurance data-crunching firm.
Silver plans cover 70 percent and have higher premiums and lower
out-of-pocket costs than Bronze plans, with an average individual
deductible of $2,907.
Gold plans cover 80 percent and have higher premiums and lower out-of-pocket
costs than Silver plans, with an average individual deductible of
Platinum plans will cover 90 percent and have the highest premiums
and lowest out-of-pocket costs, with an average individual deductible
Which of those plans is right for you depends on your health and
your financial situation:
If you already know you have an expensive medical
condition, consider a plan with a higher premium that covers more
of your costs.
If you are generally healthy you might come out ahead paying a lower
premium and a bigger share of your health costs, because those costs
are most likely not going to be that high. Of course, you need to
be prepared to pay more if you do unexpectedly become sick or injured.
The terms cost sharing or out-of-pocket costs
refer to the proportion of your medical bills you will be responsible
for paying when you actually receive health care. Cost sharing does
not include your monthly premium.
Unfortunately cost sharing is not standardized
from plan to plan and provisions can sometimes be complicated.
If you buy insurance through your state marketplace, youll
be able to see and compare the cost-sharing structure of plans before
you buy. If you get insurance through a job, the information will
be on the Summary of Benefits and Coverage form.
These are the four cost-sharing terms you will
DEDUCTIBLE. The amount you pay every year
before the insurance company starts paying its share of the costs.
If the deductible is $2,000, then you would pay cash for the first
$2,000 in health care you receive each year, after which the insurance
company would start paying its share. In every plan you can buy,
preventive services will be covered in full even if you havent
used up your deductible for the year. Some plans will also pay a
portion of your costs for a few other services, usually doctor visits
and prescription drugs, even before your deductible has been met.
This is more common with Gold and Platinum plans but some Silver
and Bronze plans also cover some services before the deductible
has been met. The only way to figure out whether a plan covers some
services "not subject to the deductible" is to study its
provisions very carefully.
COPAY. A fixed dollar amount you pay for
certain types of care. You might pay $30 for a doctor visit and
the insurance company will pick up the rest. Plans with higher premiums
generally have lower copays, and vice versa. And some plans do not
have copays at all. They use other methods of cost sharing.
COINSURANCE. The percentage of the cost
of your medical care that you have to pay. For an MRI that costs
$1,000, you might pay 20 percent ($200). Your insurance company
will pay the other 80 percent ($800). Plans with higher premiums
generally pick up a larger portion of the bill.
OUT-OF-POCKET LIMIT. The most cost-sharing
you will ever have to pay in a year. It is the total of your deductible,
copays, and coinsurance (but does not include your premiums). Once
you hit this limit, the insurance company will pick up 100 percent
of your costs for the remainder of the year. Most people never pay
enough cost-sharing to hit the out-of-pocket limit but it can happen
if you require a lot of costly treatment. Plans with higher premiums
generally have lower out-of-pocket limits.
3. Which doctors and hospitals are in it?
Every health insurance plan has a network of providersdoctors,
hospitals, laboratories, imaging centers, and pharmacies that have
signed contracts with the insurance company agreeing to provide
their services to plan members at a specific price.
If a doctor is not in your plan's network, the
insurance company may not cover the bill, or may require you to
pay a much higher share of the cost. So if you have doctors you
want to continue to see, you will want them to be in the plan's
Some state Health Insurance Marketplaces, including
those operated through the federal HealthCare.gov site, have links
to provider directories that you can see before you buy. But the
directories are not standardized and may be hard to use or out of
date. Moreover, to keep costs down, many of the plans sold through
the state Health Insurance Marketplaces have smaller networks than
you may be used to. That is why you should check and double-check
with the health plan and your doctor's billing office to make sure
your desired providers are in the network of the plan you are considering.
If you are given a choice of insurance through
a job, you can obtain provider lists from participating insurance
companies, or from the companys employee benefits department.
You can use our hospital Ratings (subscription required) to research
the quality of the hospitals in your network.
Making the right choice among healthcare
proviers can be a daunting task. Call us. We can help.