Guide to Buying Health Insurance

Guide to Buying Health Insurance

The Purpose of Health Insurance

Health insurance protects you and your family from costs associated with health care. Health costs have been increasing at a rapid rate and the average costs for medical treatments can be extremely high. For example, the medical costs associated with treatment for a heart attack or stroke could reach $72,000 or more. Without health insurance, patients must pay the entire costs of their healthcare services. Insurance is, therefore, a necessity for every person.

The Affordable Care Act (ACA) allows for children under the age of 26 to remain on their parent’s policy (even if they can’t be claimed as a dependent on the parent’s tax return or are not in school or even if they are eligible for their own job-based coverage).

Health insurance is a legal requirement in the United States. According to the Affordable Care Act most adults must be covered by some type of insurance policy. Those without insurance may have trouble getting treatment and if they do, they must pay for it in full. Indeed, an unexpected medical emergency could be financially devastating to anyone without health insurance coverage. It is essential to learn about health insurance and get coverage for you and your family.

Health Insurance Basics

Health insurance is now required for most everyone in the United States. Those who are not insured may face penalties due to non-compliance. Health insurance can be complex and requires careful consideration before deciding on a plan. Fortunately, various insurance plans are available, with a large range of options to suit the needs and requirements of you and your family.

There are two main categories of health insurance policies; individual plans, and group plans. Individual plans are those that you can purchase directly from an insurance company, via a federally or state run Marketplace (Exchange) or with the assistance of a licensed insurance professional. A group medical insurance policy is part of a plan that is provided by an employer or through the government.  Group plans generally offer increased services at lower prices than are offered by individual plans because of the large number of plan participants.

Insurance plans are structured similarly, regardless of how they are paid. Those who are offered insurance plans through their employer are required to choose their benefit selections from the plan offerings that the employer chooses.   Most employers pay a portion (generally 50% or more) of the premiums as part of the employee benefits package that they offer.

Once you are covered by health insurance you will receive a health insurance card. This card provides the insurance details needed to access healthcare benefits at a physician’s office, hospital, or other medical facilities and providers. Carry your medical insurance card with you at all times.

Health Insurance Coverage

All new insurance plans must provide the same essential coverage, known as the 10 essential health benefits. These include:

  • Emergency Services
  • Hospitalization
  • Laboratory Testing
  • Maternity and Baby Care
  • Mental Health and Substance Abuse Treatment
  • Outpatient Services
  • Pediatric Care
  • Prescription Medications
  • Preventative Services (tests, immunizations)
  • Rehabilitation Services

These rules apply to private health insurance providers; however, the rules for large employers are similar. It is important to review the list of benefits, called the Summary of Benefits and Coverage, to determine the exact benefits covered. Keep in mind that some insurance policies that were put into effect before 2014 may not provide the same coverage. If you are renewing an insurance plan, contact your provider to find out specific coverage details.

Health Insurance Costs

There are two main costs that must be considered when choosing health insurance. These include:

  • Monthly Insurance Premiums
  • Out-of-Pocket Expenses

The monthly premium is the price you must pay each month for insurance coverage. Out-of-pocket expenses are the payments that you may need to make yourself when you receive care. These expenses may include deductibles and insurance co-payments. Generally, the more you pay for a monthly premium, the less you pay for out-of-pocket expenses.

Insurance Premiums

Health insurance premiums are the costs that are paid for the policy by the insured. Premiums are often paid on a monthly basis. Plans are standardized into four basic category types to make review and comparison easier. Here are the premium plan options, along with the coverage they offer.

  • Bronze Plan – Covers 60% of health care costs. Provides the lowest monthly payments with the highest out-of-pocket costs such as deductibles and copayments.
  • Silver Plan – Covers 70% of health care costs with higher premiums and lower out-of-pocket costs than the bronze plan.
  • Gold Plan – Covers 80% of health care costs with higher premiums and lower out-of-pocket costs than the silver plan.
  • Platinum Plan – Covers 90% of health care costs. This plan has the highest premium costs and the lowest out-of-pocket expenses of all the options.

Choosing the Best Plan for You

There are many options available because every person or family has unique health care needs. The best plan for you may not be the one that is best for someone else. If you have a medical condition that requires expensive treatment, you may want to choose a plan that covers most of these costs. If you are generally healthy, with no ongoing medical problems, you may prefer to purchase a plan with a lower premium. However, it is important to keep in mind that if you become unexpectedly sick or injured, you may be required to make large medical payments that may not be practical.

Considerations When Choosing a Health Insurance Plan

There are many things to consider when choosing a new health insurance plan. Some of the questions to think about include:

  • Is medical insurance offered through my employment?
  • Am I (and is my family) generally healthy?
  • How much money can I afford for monthly insurance premiums?
  • What type of extra policy provisions do I need?
  • What is the co-insurance or co-pay that I am able to provide?
  • Is my doctor part of the network?
  • How much prescription coverage do I need?
  • Do I qualify for subsidized options?
  • Am I over the age of 65?
  • Do I have children that require medical coverage?

Generally, it is advisable to opt for the best medical insurance coverage you can afford. This will provide the greatest amount of protection in the event of a catastrophic illness. Those who are unsure about how much to spend on medical coverage should consider the alternatives. If a major medical event was to happen and you did not have adequate insurance coverage, how would you pay for the expenses? Payment of regular monthly premiums is a better alternative than going thousands of dollars into debt for an expensive medical procedure.

Health Insurance Plans

Health insurance is divided into various plans. These plans offer a network of doctors and hospitals within its coverage range.

  • PPOs (Preferred Provider Organization) plans
  • EPOs (Exclusive Provider Organizations)
  • HMOs (Health Maintenance Organizations)
  • POS (Point of Service Plans)
  • HDHPs (High Deductible Health Plans)
  • ACOs (Accountable Care Organizations)

Each network provides a group of physicians and care providers where you can access health care. It is important to review the list of providers, along with their locations, to determine which plan is right for your specific needs. Generally, PPOs are the most expensive insurance plans. This is because they tend to have the largest number of providers and the greatest flexibility. HMO’s often require you to first consult with your primary physician for most medical matters. If a specialist is necessary, your doctor will provide you with a referral to a physician within the network. If you want to receive care from a provider outside the network you must first check with your provider to determine how the costs will be handled. In some cases, you may need to pay for a larger portion of the costs, or even the entire amount of these services out-of-pocket, so it is important to find out coverage before making medical decisions.

Those who wish to make changes to their current health plan can usually do so only during open enrollment. This is a period of time starting in November when people can sign up for health care that will begin on January 1 of the next year. Certain special circumstances (marriage, change in family status etc.)  may qualify an individual for a special enrollment. This allows you to enroll in insurance plans at times other than the designated enrollment period.

If you had a health plan through your employer and became unemployed, you may have the option to continue coverage through Cobra for a period of time. You will be required to pay for this insurance, although it is offered at a reduced price. If you lost your insurance due to unemployment, you may be eligible for a special enrollment period to allow you to purchase insurance.

Other short-term health plans are available for those who require immediate insurance but do not qualify for a special enrollment period. These options can be critical because although they are often more expensive than other policies, they provide protection without a lapse in coverage.

Out-Of-Pocket Costs

Out-of-pocket costs include the portion of medical payment that you are required to make outside of your monthly insurance premiums. You are responsible for payment of these items based on your current insurance plan. These costs consist of four types of expenses.

  1. Deductible The deductible is the amount of money you pay each year before the insurance company begins making its share of payments. For example, if you have a $2,000 deductible it means that you must pay the first $2,000 of medical costs for the year before the insurance policy pays. Some plans are structured to pay a part of the costs for some services before the deductible is met. Wellness services (as defined by the ACA) are a good example of services that would be covered prior to having met your deductible. Check with the plan to determine the details of this coverage.
  2. Co-Pay The co-pay is the amount of money that must be paid by you at the time health care is provided. For example, a plan with a $25 co-pay requires you to make a $25 payment to the doctor or hospital at the time of your visit. The Co-payment is a fixed price.
  3. Co-Insurance Insurance policies provide for a percentage of payment for medical treatments. For example, a policy with 60% coverage will pay for 60% of the medical costs while you will need to pay 40%. When you hear people talk about coverage of 80/20, it means that the insurance policy pays for 80% and the insured pays for 20%. This amount is typically billed to the insured after the insurance company determines their payment due.
  4. Out-Of-Pocket Limits Insurance policies have a maximum out –of-pocket amount per year. This is the most you will pay each year for deductibles, co-payments, and co-insurance. Often, after the limit is reached, the policy may pay for 100% of all additional costs for the year. The maximum for ACA compliant plans for 2016 is $6350 per person.

Remember that deductibles, co-payments, co-insurance, and out-of-pocket limits are accumulated on a yearly basis. At the start of a new year, the calculations are reset and begin again. Therefore, it is necessary to be able to plan for all of these expenses on a yearly basis.

It is also important to know about any limits or caps on medical payments. Some insurance policies provide payments up to a specific amount of costs. Once those limits have been reached it is up to the insured to make the required payments. This is a critical piece of information because some medical procedures and treatments are very expensive.

Public Insurance Options

There are several public insurance options that are available on a limited basis. These are provided through the government for those who qualify based on various criteria. Those who are low income, senior citizens, or students may be eligible to participate in these plans. These types of health insurance options are government subsidized and the costs to you are usually determined by need. Those who qualify for these plans can enroll at any time of the year and are not limited to the typical enrollment period.

  • Medicaid

Medicaid provides government subsidized insurance for people with limited income and resources which are insufficient to pay for health care.

  • CHIP (Children’s Health Insurance Program)

Children of low income families may be eligible for health insurance through this government program.  CHIP provides health insurance to children that includes these basic services:

  • Regular healthy child checkups
  • Immunizations
  • Prescription medications
  • Hospital care
  • Dental and vision care
  • Lab and x-ray services
  • Emergency services
  • Medicare

Medicare is a national social insurance program that provides health insurance for generally for citizens over the age of 65, and in some instances, people under 65. Medicare  beneficiaries can enroll in traditional Medicare supplement plans and then purchase a Medicare Supplement(s)  policy to cover some of the out of pocket costs that are not covered under the regular plan. .Medicare Advantage plans are HMO style plans and maybe good alternatives for some Medicare beneficiaries that reside in a service area. Medicare Advantage plans typically come with little to no out of pocket costs, but are more restrictive in provider choice   .

  • PCIP (Pre-existing Condition Insurance Plan)

People with pre-existing conditions may be denied coverage through regular insurance policies. PCIP are plans that allow you to get the medical coverage necessary. They are available for U.S. citizens who have been uninsured for at least six months, have a pre-existing medical condition, or have been denied health coverage for a medical reason.

These plans are available through the Affordable Care Act and can be located through the health insurance marketplace, through your individual state.

Where to Purchase Health Insurance

Health insurance in the United States is offered by a large number of providers. If health insurance is available through your job it is likely a good option and one that may be the most cost effective. Workplace insurance options often include several choices that allow you to get the coverage and premiums that you need.

Health insurance is also available to be purchased privately. You can purchase health insurance through an insurance agent, directly from an insurance company, or through the health insurance marketplace. If you need to purchase health insurance do not delay. It is important to keep you and your family protected at all times.

Health Insurance Marketplace

The Health Insurance Marketplace offers an easy way for consumers to review and compare health insurance policies online. It is also called the Health Insurance Exchange. Here you can learn more about health insurance choices and get pricing for health insurance policies based on your specific needs. In addition to the federal marketplace, each state provides information for buying health insurance. The state information can be obtained through the main Health Insurance Marketplace website.

Important Health Insurance Information at a Glance

  • Most everyone, with a few exceptions, must have health insurance
  • Health insurance protects you from the high costs of health care
  • Review various insurance plan options to determine the best choice for you
  • Consider premium payments, deductibles, out-of-pocket costs, and coverage limits when choosing a policy
  • Re-evaluate your health insurance needs every year
  • Open enrollment for the following year of coverage begins in November.
  • Always carry your health insurance card with you

Please print this document and use it as a guideline when purchasing health insurance. We hope this document makes the process of selecting and buying insurance easier for you. We strongly recommend that you find an insurance agent to assist you in making the best possible decisions when choosing the best health care insurance for you and your family. Goldberg & Osborne wishes to thank Michael Barberio, Vice President at CBIZ, for his valuable contributions to this guide.

DISCLAIMER: This guide is provided only for informational purposes and is not intended to be a substitute for legal or other professional advice. This guide does not contain nor is it intended to provide legal or other professional advice for any specific situation and readers should not take action or refrain from taking action, based only on the information provided in this guide. Goldberg & Osborne has attempted to provide accurate and current information in this guide, but cannot and does not guarantee that the information is accurate, complete, or up to date. This guide may contain links and/or search terms that will lead to external websites as a convenience to the reader, but Goldberg & Osborne is not responsible for the content or operation of any website other than its own website. The presence of a link or a search term does not imply and is not an endorsement by Goldberg & Osborne of the website provider or the information contained on any linked website or on any website contained in search results from a search term provided in the guide.