Have you just moved to the US and are attempting to pick your health insurance plan but have no idea where to start? Are you confused by all the new terms? Maybe you have picked a health insurance plan but are not sure you have made the right choice.
So where start with picking your plan?
The right health insurance plan for you will be ultimately be dependent on your personal situation, based on 2 main factors – the total cost involved and the type of plan it is:
- Total costs – this includes the premium (how much you pay towards the plan), and then other costs involved such as the deductibles and out of pocket expenses such as co-pays and co-insurance.
- Type of plan – this determines the network coverage of your plan, who you can see (in network or out of network) and the process for being referred to a specialist. The type of plan is typically either part of a HMO (health maintenance organisation) or PPO (preferred provider organisation).
Okay! Lots of terms here… Deductibles, Co-pays, HMO, PPO, in network, out of network. Bear with! Keep reading to learning more.
In this post we will cover how to understand your total costs so you can choose the right health insurance plan for you.
Understanding Total Costs
This is probably the most important part, as understanding total costs will allow you to understand the affordability of the medical plan and then to prepare for those costs.
To understand your total costs you need to understand the following terms, Insurance Premium, Deductibles and Out of Pockets costs such Co-pays and Co-insurance. Confused?! Do not worry, we are here to explain them all. Scroll to the bottom for a table summarising the definitions.
Total Costs = Insurance Premium + Out of Pocket Costs (Deductibles and co-pays/ co-insurance)
The amount you will pay to have the insurance coverage. If your medical plan is through your employer, your premium will be mainly subsidized by your employer and therefore you will pay a contribution towards that premium. Your employer will let you know how much your premium is. This will come out, each pay period. Your premium depends on the type of plan you choose, how many family members you cover, whether you are a full-time employee or part-time employee, and other factors such as tobacco use.
The amount you have to pay, for that year, towards your health services before the plan pays anything. In the UK this is the same concept as excess on insurance. Deductibles (much like the premium) will increase the more family members you cover and based on the type of plan (in or out of network).
E.g. you may have a deductible of $500 as a single person or $1000 if you cover your family. This means if you need to use medical services, you will need to pay this amount first before you will have any costs covered by your insurance plan. Therefore you have to be prepared to pay this amount first.
There are some cases where you may not need to meet the deductible first before the plan covers you. Most plans must cover “preventable care services” for free. These are things like screening, shots, vaccinations. Go to healthcare.gov for a full list of what is covered by this for adults, women and children. Lastly, some plans do not require the deductible to be met for certain services requiring a co-pay e.g visiting your primary care provider.
Please Note: not every plan has a deductible, some have a zero deductible which means you can start gaining from your plan right away. There is usually some drawback to this “perk”, this could be a much higher premium, or a higher out of pocket maximum.
Copayments or Co-pays
The amount you pay for each service. Each medical service will have a total cost. The co-pay is the portion that you will pay towards that service. The rest will be covered by your health insurance provider. Your plan will let you know exactly what the co- pay is for every service. Your health plan should provide a long comprehensive list of all medical services and what you need to contribute towards them.
E.g. you may have a $25 co pay every time you visit your primary care physician, this is the same as going to your GP in the UK.
This is another term you may see listed on your insurance. Co-insurance is very similar to co-pays, except it is the % amount you pay towards that particular service. This is often used if your plan lets you go out of network or for services where the exact cost is less predictable.
As an example, assuming in you stay in network, it is easy for your health insurance to state a co-payment of $40 to see a specialist. If you go out of network they are not in control of that specialist’s fees, therefore they will state the co-insurance, the % you will need to contribute to see an out of network specialist.
So when does it end?
Lets imagine the worse case scenario of hospitalization and ongoing treatment costs. This is the biggest fear when it comes to medical bills in the USA. When do you stop paying? Well that is where your out-of pocket maximum is important to know.
Out of Pocket Maximum
Each plan will have an out-of-pocket maximum, where beyond this point you no longer have to pay. Hurrah! When you reach this amount, the insurance will pay 100% for covered services. Your out-of-pocket maximum is made up of your deductible and out of pocket costs such of co-pays. Much like the premium and deductible, the out of pocket maximum will be dependent on who is covered and the type of plan.
Total Costs of Health Care = Insurance Premium + Out of Pockets Costs (Deductibles + Co-Pays)
|Insurance Premium||The amount you pay or contribute (if through employer) to have your chosen medical plan.|
|Deductible ||The amount you must pay towards medical services before the insurance pays anything (excluding free preventative services).|
|Co-Payment (co-pays) ||The amount you pay towards medical services and prescriptions. The rest is covered by your insurance.|
|Co-insurance ||The % you pay towards a particular service (usually for out of network services).|
|Out of Pocket Costs ||Deductibles, co-pays, co-insurance|
|Out of Pocket Maximum ||The maximum you will have to pay for your medical plan in one year.|
There you have it, that is how you understand the total costs of your plan. The next post will cover how to choose the right type of plan.
If you haven’t already, read my previous post on why medical plans are needed in the USA.
Watch my Vlog – How to Pick the Right Health Insurance Plan