One of the things I regularly help customers do is choose a health insurance plan that meets their needs. Different people use health insurance differently, and sometimes a careful cost analysis is necessary to determine the best option. While your independent health insurance agent should always be willing to help you sift through the available plans, it always helps to have a bit of knowledge before you call her.
Any discussion of health insurance plans requires knowing a little bit of insurance jargon:
Premium is the amount of money paid for a policy. With health insurance, the premium is generally collected monthly, and is paid directly to the insurance company.
Out-of-Pocket refers to the costs you will pay for services outside of your premiums and the coverage your policy offers.
Deductible is the amount of money you will pay for covered services before the insurance will begin coverage.
Copays are set amounts that you pay for specified services, such as visits to a doctor’s office or prescription drugs.
Coinsurance is the percentage of the cost of covered services that you are responsible for paying after the insurance does its part.
For example, let’s say you have a $1000 deductible and 20% coinsurance, with a $25 copay for a doctor’s visit. You go to your doctor because you are sick, so you pay your $25 copay. Then the doctor says you need to go to a lab for some tests. The total cost of the tests is $200, so you pay that and it goes toward your deductible. The tests show you need surgery, so off you go to the surgical center. The total bill there is $2000. You pay $800 to fully satisfy your deductible, leaving $1200. Then you pay $240 for your coinsurance portion of the cost, while the insurance company pays the remaining $960. The amount you will pay for this particular illness or injury is $1265.
Now, let’s say you have a plan with a $2000 deductible and 30% coinsurance, and a $30 copay on doctor’s visits. For the same services you would pay $2070 and the insurance company would cover $160.
Does this mean that the first plan is better? It depends. If you are generally healthy and only go to the doctor occasionally, the second plan may save money on your premium. If you know you have managed care for a disease and you will definitely be hitting the deductible whether it’s $1000 or $2000 or even more, then paying extra in premium for the richer plan may make sense.
Let’s talk about the different kinds of networks available. In health insurance jargon, network refers to the doctors and facilities participating in a particular plan. If a doctor doesn’t “take” your insurance, it’s because he’s not in the network for your plan.
There are two main types of health insurance networks, PPO’s and HMO’s.
PPO stands for Preferred Provider Organization, and is typically the broadest network, meaning it also comes with a higher premium. In a PPO, participating in-network doctors are covered at a higher rate than non-participating doctors, but you may still choose to see someone out of network if you are willing to pay more. Also, the networks tend to be more flexible if you travel from state to state or work remotely from a state other than the one your employer is located in. With a PPO, you do not need to designate a primary care physician and you do not need a referral to see a specialist.
HMO stands for Health Maintenance Organization, and network availability may range from quite broad within your state to quite narrow. The smaller the network, the less expensive the premiums will be. HMO’s do not cover care from non-participating doctors. With an HMO, you must name a Primary Care Physician, or PCP, and you must have a referral from your PCP to see a specialist.
Health insurance companies have been trying to meet demands from customers for both broader network options and lower premiums, and have developed certain variations on these two main types of plans. You may see terms like Point of Service (POS) or Exclusive Provider Organization (EPO). It’s important that you find out if the doctors you like are included in the network of any health insurance plan you buy, unless you are willing to change doctors. It’s also important to make sure there are in-network doctors close to where you live. Your independent health insurance agent can help you determine if a particular network will meet your needs, or, if you prefer the DIY approach, you can go online to most insurance companies and use their provider search tool.
The most important question to ask when selecting a health insurance plan is, which plan design fits my needs the best? That may be the lowest premium, highest out-of-pocket, smallest network plan, or it may be the highest premium, lowest out-of-pocket, largest network plan, or it may be something in between. We suggest discussing your options with your independent health insurance agent to make the best decision for you and your family.
Emily Champoux, Benefits Advisor