A Guide to Health Insurance

As an experienced sales rep for health insurance in America, I’ve seen both the pros and cons of our healthcare system. My job is to help people find the insurance plan that best fits their needs and fits their budgets. It’s become increasingly difficult to find affordable health insurance that will give you the coverage you need, but since Covid, some plans have become more affordable.

A lot of people confuse being healthy with being invincible. I was guilty of it in my younger years, as are most people in their 20s. If only they could see how much simple ER visits cost for something as silly as a broken bone. Being healthy doesn’t exclude you from accidents, though, and ending up in the emergency room without insurance can leave you with hundreds of thousands of dollars worth of medical bills. The healthcare system in America consists of two sectors, public and private.

Private Health Insurance

Private healthcare is what it sounds like, private health insurance companies offering individuals and families health coverage. These companies generally don’t cover groups, so you most likely won’t be offered a private health plan through work. 

Most private health insurance plans focus on your health, so you could automatically be disqualified if you have preexisting conditions or take certain prescriptions. In the public healthcare system, they are no longer allowed to deny anyone due to medical questions or screenings. Furthermore, discounts are not usually offered for private plans like most public plans. 

Public Health Insurance

Our public healthcare system is what you may know as Obamacare. You automatically qualify for Medicaid and free government insurance if your income is below a certain threshold. You automatically qualify for Medicaid and free government insurance if your income is below a certain threshold. Obamacare is public health insurance available to all, and it even offers incentives for people who have low income. 

With Obamacare, though, you qualify for what they call a subsidy. Based on the annual household income reported on your taxes, you could get a percentage discounted from your monthly premium. That allows for low or no-income households to have fair access to decent health coverage, and it does not affect or decrease the other benefits of your plan.

Medicaid is a government insurance plan tailored to fit the needs of little to no-income households. It also helps to cover pregnant women, children, and people with disabilities. The annual income threshold for Medicaid varies by state and number of household members. Again if you’re below the yearly household income threshold, you will automatically be qualified for Medicaid.

Introduction to Health Insurance Terms

When people shop for insurance, I notice that they’re going in blind. They have no clue what the terms mean or how they all work together to save your wallet when you need them the most. Here are some of the most common insurance terms associated with buying a health insurance policy.

Premium: One thing most people know is the premium, the amount you’re responsible for monthly, the one that gets auto drafted from your account or paycheck. The premium payment keeps your health insurance policy active and in force.

Your deductible: is the amount you’ll be responsible for before your plan kicks in. For example, if you have a $3000 annual deductible, you’ll be responsible for the first $3000 towards your healthcare expenses. The deductible doesn’t include services with a set copay like doctor visits or urgent care. After you reach your deductible, you’ll only be responsible for the remaining coinsurance until you meet your out-of-pocket max.

Copayment

Copays are the amount due at the time of your service. Usually, your primary care facility or specialists have a set copay ranging between $25-$75 each time you visit; this will also vary by health plan though not all insurance policies have copays. Coinsurance is the percentage of the bill you will be responsible for after being adjusted by the insurance company. For example, if your plan covers 80% of your hospital bill, you’ll be responsible for the remaining 20% billed to you after they cover their portion.

Out of pocket max

Out of pocket max is something most people overlook, but it’s one of the most important features of your health plan. While having an affordable monthly premium and a feasible deductible are high priorities, your out-of-pocket max should also be carefully considered. The out-of-pocket max is the amount you’ll pay in the year before your plan kicks in 100%. 

After you reach your deductible, you’re still responsible for a percentage of your bills until you reach your out-of-pocket max. You could have a reasonably low deductible, but if your out-of-pocket maximum is high, you’ll wish you picked a different plan. It can mean thousands of dollars in unexpected medical bills if you don’t look closely.

Health Insurance Policy Types

Health insurance policies can be long-term or short-term. Long-term health plans usually go for 12 months, or sometimes even longer, whereas short-term plans typically range from 3 to 6 months. 

Short-term coverage

Short-term health plans run for an average of 3-6 months and must continuously be renewed. Most short-term plans offer lesser coverage and are only used to bridge the gap until the next open enrollment or offer of employer benefits. 

For example, if someone loses coverage and only needs it for a few months, or if they start a new job and have to wait through a probationary period before acquiring coverage through the company. In these situations, it wouldn’t make sense to purchase a long-term plan, so these are ideal situations for a short-term plan, but overall long-term plans are recommended when looking for full benefits.

Long-term coverage

Most people prefer long-term health plans due to their convenience and higher benefit levels. Sometimes you’ll find plans that have different coverage periods than others. Most plans run through the calendar year, which means they start on January 1st and end on December 31st. 

If you have a plan that runs on policy year, it usually means you signed up for it sometime outside of the usual enrollment period. This isn’t a problem, and it doesn’t affect your benefits. If you started your plan in July, it’d be effective until July of the following year. Remember those random dates; you don’t want a lapse in coverage!

Medicare: Not to be confused and mistaken for Medicaid, Medicare is a federal health insurance plan designed for people 65 and older. Once they hit 65, they are enrolled in healthcare tailored to seniors. Some younger people with disabilities or diseases may also qualify early. They also have supplemental plans that can be added to the original coverage if they have additional expenses.

In my experience, finding the right healthcare plan is crucial. It’s not only important for people who have preexisting conditions or upcoming procedures. It’s for the “what ifs,” the random trips to the ER, the car accident, the kidney stone. You never know when you’re going to need your insurance plan.

Health Insurance Savings Accounts

FSA’s and HSA’s are something that might ring a bell. You and your employer use these savings tools to pay for covered medical services. Look at it as savings account for your medical bills.

FSAs are also known as flexible spending accounts. They are usually offered through employer plans, and they allow you to set aside pre-tax dollars for medical expenses. This can include copays, hospital fees, testing, physical rehab, vaccines, dental, etc.

HSAs are also known as health savings accounts. The employer sets these up and sets aside money for medical expenses for their employees and other group health plan members. These can be very helpful, but they should be paired with an HDHP, also known as a high deductible health plan.

Health Organizations

Another familiar term may be in or out of network. This is important no matter what type of plan you have. If you purchase insurance through a specific carrier, they have a set network of doctors and hospitals contracted with that offer discounted services. 

Using these doctors and hospitals will save you unnecessarily out-of-pocket expenses since going out of network can sometimes leave you responsible for the whole medical bill. Stay in your insurance plan’s network, and your services will be discounted and covered as described in your policy, but you risk inflated medical bills if you leave the network.

Health maintenance organization

This is where having an HMO or a PPO comes into play. An HMO, also known as a health maintenance organization, is where it’s crucial to stay in-network. These plans are designed to use their contracted doctors and hospitals and refer to them. 

You must have a referral from your primary doctor to see anyone else. Doctors are considered your ‘gatekeeper.’ Even if you have a specialist you’ve seen for years, you first must see your primary care doctor and get a referral before seeing them again if you want your HMO plan to cover the visit.

Having an HMO means you must use their network to receive your plan’s benefits; going outside of their network will result in out-of-pocket expenses with no discounts. Whatever you end up paying will not be applied to your deductible or out-of-pocket max. There is no benefit to leaving the network with an HMO plan, so be sure when choosing a plan that your preferred doctors and hospitals will accept it first.

Preferred provider organization

A PPO, also known as a preferred provider organization, will allow you more flexibility. You can freely choose to see whoever you’d like, including out-of-network doctors! These plans not only usually have a more extensive network of doctors and hospitals, but you won’t need a referral to see them. 

Don’t be fooled; your services will still not be discounted, but your plan benefits will still apply, and they will count towards your deductible and out-of-pocket max. These plans can be a little more pricey, but for people who have several doctors they need to see, or preexisting conditions that require a lot of referrals, it may just be worth the extra cost and less hassle.

Comparing Health Insurance Plans

When comparing health plans, it’s important to know all of these terms. When looking at plans side by side, it’s easy to see which would be the most affordable monthly, but to calculate what you’d be spending in case of an emergency, I’ll tell you how I narrow it down. It’ll make the difference between guessing which plans look best and making an educated decision.

Out of pocket max

First and foremost, affordability is key. If you can’t afford your monthly premium, you’ll have no insurance, which is the most important factor. The second most important is your out-of-pocket max. Most people will insist it’s the deductible, but remember that your deductible is not the final amount you’ll be responsible for at the end of the road.

Usually, the out-of-pocket max is higher than the deductible, so in cases like this, it’s important to look at the out-of-pocket maximum first. Unfortunately, that’s not usually the case, so make sure your out-of-pocket max is feasible if your bills ever get that high. Sometimes the deductible and out-of-pocket maximum will be the same, though, in these cases, it makes shopping a little easier. 

Deductible: Then comes your deductible. Its neck and neck with out-of-pocket max; since these are both the amounts you’ll be responsible for in case of emergency, your deductible is not all you’ll be responsible for either. That doesn’t mean that a high deductible is best either because you can’t find a lower out-of-pocket max. You’ll still want your deductible to be as low as possible.

Copayment: When looking at the copays you’ll be responsible for, it’s essential to make sure they are affordable enough for continuous visits to your doctor. If your copays are too expensive, you’ll be hesitant to use your plan and may skip some necessary visits while deciding between affordable healthcare and saving money. That shouldn’t be a choice you have to make if the situation arises.

Calculating Policy Yearly Total

The way I calculate the overall yearly total of what you would spend in a worst-case scenario goes something like this. You have a $500 monthly premium, a $5000 deductible, and a $10,000 out-of-pocket max. (Notice how I excluded copays, not because you won’t have to pay them, but because they all go towards these expenses listed.) A $500 monthly premium multiplied by 12 months comes out to $6,000. That is what you’ll pay to keep your coverage in force.

If you end up with a hospital bill for $50,000, you’ll reach your out-of-pocket max. In that case, you would be responsible for your $5,000 deductible upfront. After your deductible is satisfied, you’ll pay a percentage until you reach your $10,000 out-of-pocket max. Again, this varies with each plan. 

Most are 80/20, 70/30, or 60/40. Overall, you’ll need to add up your total monthly premiums and out-of-pocket max to calculate what you’re responsible amount. With this particular plan example, you will spend a total of $16,000 in case of emergency, but that is where your expenses will be capped, and from there, your insurance plan will kick in 100%

Common Mistakes Purchasing an Insurance Plan

When people pick insurance plans for themselves and their families, some think a short-term plan is sufficient coverage for everyone. Renewing it every few months doesn’t seem bad when you’re saving a couple hundred monthly, right? Wrong. 

Short-term plans are great for bridging the gap between one plan to the next, but they don’t provide nearly as much coverage, and they can deny your renewal if you’ve had too many claims during your last term. These plans are not usually underwritten, but if they notice you’re costing them too much with your medical expenses, they can and will refuse to continue to cover you after your term is up.

Underwriting

Underwriting is another thing I tell certain people to avoid. Don’t get me wrong, some underwritten plans are excellent and can be much less expensive in some cases. They’re worth the hassle if you’re healthy and can qualify, but it can be challenging to get an underwritten policy. 

I usually advise that people with severe and ongoing preexisting conditions avoid underwritten plans. It can be a long process of applying, waiting for your medical records, and getting approved. Doctors’ offices can legally take up to 30 days to respond to an insurer’s request for medical records. After waiting, it gets discouraging to see your approval odds aren’t what you hoped they’d be, leading you to square one, shopping around again.

Network: Another big mistake is not checking to see if your doctors are in-network before enrolling. In-network can be crucial for people with ongoing treatments or preexisting conditions, as you won’t want to change doctors every time you change plans. Be sure to call your providers before you choose a plan.

Insurance Claim Tip: You shouldn’t pay medical bills upfront; always wait until you get an explanation of benefits from your insurer. Often, facilities will bill you directly for the total cost of services, so if you get an outstanding bill, call your insurance company to clarify. They have their bill for you, and it’s much less after their adjustments.

Prescription Drugs 

Prescription Drugs: Make sure your prescription drugs are covered. I see this often, and it can be one of the most expensive mistakes you’ll make. Most prescriptions have a generic version, which is usually relatively affordable. Unfortunately, those brand-name ones that don’t have that option can leave you with hundreds or even thousands of dollars in pharmacy bills. Whether your prescription is generic or brand name, you should see how much your copays will be before settling on a plan.

Plan Use: Estimating how much you use your plan is important. If you’re relatively healthy and only go once a year for a physical or rarely when you get sick, this step isn’t as hard. If you continuously use your plan, calculate what your copays and other expenses will add up to annually; this will help you choose a plan that fits your needs without breaking the bank.

Open Enrollment: Overlooking the open enrollment period can leave you without coverage for a whole year. Open enrollment is usually between November to December, with plans beginning in January. Again, private plans are available all year long, but most are medically underwritten, so if your approval odds aren’t favorable, you might miss out.

Qualifying events

There are always loopholes; they call qualifying events. These include loss of coverage, whether due to losing or changing jobs, no longer qualifying for Medicaid, turning 26, and having to be an adult are all acceptable qualifying events. 

Changes in the household are also considered. Getting married or divorced, having or adopting a child, or a death in the family. Changes in residence, or moving to a different county, state, or zip code, a student is moving from one school to another, seasonal workers shuffling from one place to the next, or transitioning from a shelter or halfway house. 

Some other qualifying events can include changes in household income, gaining membership in a federally recognized tribe, acquiring US citizenship, leaving jail or prison, and starting or ending a career in the military. Loss of coverage is the number one qualifying event used to get into a plan outside of open enrollment.

Medically Necessary

One last thing, the term ‘medically necessary’ is an important one when gauging what your plan will cover. Medically necessary is when your insurance provider deems a procedure in the policy as required. For example, implants for cosmetic purposes might be denied by the insurer even though they are required for a breast cancer survivor. Overall, educating Americans on their health insurance plans and how to read them has always been a challenge. Still, as the market evolves and people become more aware, it gets easier every day.

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