Graduating from college, landing your dream job and finally starting your life as an adult. That is the dream for many young adults. Your first day on the new job is often filled with orientation, meeting new people and the dreaded new hire paperwork. Many employers offer health coverage to their employees and larger employees often have several health plans to choose from. Chances are this will be the first time you look at health insurance let alone understanding health insurance enough have to pick which plan you would like. Health Insurance Companies now provide a SBC or Summary of Benefits and Coverage which will help explain the coverage to you, however they still can be confusing to read if you don’t know what you are looking for. There are numerous types of health insurance plans available however the following 5 sections will to apply to most plans.
A copayment, or copay, is a set dollar amount you will pay for a covered health care service. Copay’s typically apply to office visits or prescriptions.
Chris goes to the Dr and gets a prescription for a sinus infection. He has a $20 office visit copay and a $10 prescription copay. He will pay $20 at the Dr’s office for his visit and his health insurance will pay for the remainder of the bill. He will pay $10 at the Pharmacy for his prescription and his health insurance will pay for the rest of the cost of the medication.
The deductible is the amount you are responsible for each year before the insurance company begins to pay. For example, if you have a $1,000 annual deductible, your insurance will not pay for anything until you pay $1,000. Deductibles are usually calendar year meaning that they start on January 1 and run though December 31. The next January the deductible will start over.
Chris has a health plan with a $1,000 deductible. He is mowing his yard and twists his ankle and goes to the emergency room. Chris has an X-ray to determine nothing is broken, is given a brace and some pain medication and is sent home with a bill for $800. He will be responsible for the total bill because he has not met his deductible yet. The $800 is applied to the $1,000 deductible.
Coinsurance is your share of the costs, calculated as a percentage. Coinsurance usually applies after the deductible has been met. For example a 20% coinsurance means that you will pay 20% of the cost and your heath insurance company will pay 80%.
Chris is still not feeling better after a week and returns to the Dr for a follow up. Additional tests are preformed and it is determined that he tore a ligament and needs to have a surgery to repair. The surgery costs a total of $2,000. Chris’s surgery came the same year as his initial accident so his deductible has not reset. He will pay the remaining $200 of his deductible ($1,000 – $800 ER cost) before he will be responsible for the 20% coinsurance. After that, his health insurance carrier will pay 80% for a total of $1,440 and Chris will pay 20% for a total of $360. ($2,000 bill – $200 deductible = $1,800. $1,800 x 80% insurance pays = $1,440, $1,800 x 20% you pay = $360). The total Chris pays for his surgery is $560.
An Out-of-Pocket Maximum or OOPM is the most you will pay for a covered service during the benefit period, usually the calendar year. This protects you from high medical expenses. After you reach your OOPM you health insurance plan will cover the remainder of your medical costs at 100%. Some health plans do not count all of your out-of-pocket expenses towards the OOPM. For example some plans will not include deductible, copays, coinsurance or other expenses towards this limit.
Out-of-Pocket Maximum Example
Chris goes back to his Dr several months after his surgery and is still not any better. They decide to do an additional surgery on his ankle. The total cost of this surgery is $10,000. Because Chris has already met hid deductible he will only need to pay his co-insurance up to a $3,000 OOPM. Chris’s plan allows the deductible to count towards the OOPM. Chris has a 20% coinsurance which would be $2000 for this surgery. However, Chris has already met $1,360 towards his OOPM ($1,000 deductible and $360 for the coinsurance in the previous surgery) so he will be responsible for $1,640 of this bill, meeting his OOPM of $3,000. The insurance carrier will then pay for the remainder of the cost of this surgery and for the remainder of the year. Without the OOPM Chris would have had to pay the $2000 in coinsurance and have spent $3,360 so-far this year.
Preventative care is medical services used to prevent chronic illnesses from occurring. Rather than waiting on someone to become sick, preventative care aims to keep people healthy, or at least catch an illness at the earliest possible stage. Under the ACA or Affordable Care Act, non-grandfathered plans are required to provide preventative services at no out of pocket cost to the member. Many grandfathered plans still cover preventative services, however they will typically have a small copay or coinsurance that applies. Your plan’s SBC will tell you if you have a copay, coinsurance or no cost associated with preventative care visits.
Preventative Care Example
Mary goes to her physical for a yearly exam and mammogram. Mary’s plan is a non-grandfathered plan and is required to cover preventative services at 100%. Because this is a preventative checkup her health insurance plan will cover the cost of the visit at 100%. However, if Mary goes to have a mammogram done because she finds a lump on her breast, this is no longer preventative. This is now a diagnostic visit because they are looking for the reason of the lump. This visit is now subject to the deductible and coinsurance of her health insurance plan.
Understanding Health Insurance can be difficult but if you break it down into these 5 sections, it can be easier to digest. Your company HR department should be able to assist you with additional information or you can always contact your insurance agent to help you understand your coverage and/or options. Do you have a policy already that you don’t understand? Give us a call and we can schedule an appointment to help.