If you are trying to understand the world of healthcare, healthcare cost and insurance, you are probably feeling confused, frustrated and annoyed. Welcome to the club. Let alone a “high deductible health insurance plan.”
The majority of Americans don’t understand how their health insurance works. They are even more confused when it comes to knowing how much they will pay when seeking medical care. Politicians, government Bureaucrats, hospitals and insurance company executives are not making things any better. In fact, it seems as if the system is designed to keep us confused. They can’t even agree no things like transparent pricing!
Whats in this article……
In this article, we are going to discuss a type of insurance coverage known as a High Deductible Health Insurance. These plans are becoming more popular but how do you know they are the right plan for you? Keep reading and we will highlight some key points that will help you maximize the benefits while avoiding the pitfalls.
About 30 percent of American’s now have insurance called a “High Deductible Health Plan”. Employers are beginning to see the benefits of these plans because they are generally less expensive than traditional insurance.
To understand a high deductible plan, you’ll need to understand a few terms.
Premium, Deductible, Copayment…..
Premium, Deductible, Copayment… Once you understand how these terms apply to the policy and your coverage, things begin to make more sense. The insurance “Premium” is the amount paid to purchase the policy. This amount is paid in order to have the privilege of carrying that pretty little insurance card around. Commonly, the premium cost is shared between the employer and employee. Most people will see it taken out of their paycheck as a deduction.
The “Deductible” is a set amount of money you pay when seeking medical care. The deductible is the amount of money you pay for treatment before the insurance company begins to pay anything. The deductible cost is not shared with the employer.
Lastly, you should understand another expense called the “Copayment”. The “Copayment” is paid by the insured and it is an amount separate from the deductible and premium. under the insurance plan. In many instances, the copayments are the amount you pay once the deductible is met.
Let me break away from the vocabulary lesson for a moment…
You are probably beginning to see a trend. You and your employer are paying a lot of up-front costs before the insurance company pays anything. Premiums can cost anywhere from several hundred to several thousand dollars per month. Deductibles under a “High Deductible Plan” average between $2500-$5000 per year. Copayments generally consist of a flat $20-$60 per visit fee or can be based on a percentage of the cost of treatment. Usually around 20 percent.
At first glance, these plans don’t look very appealing. But not so fast. There are some real advantages to them. First, most high deductible plans allow you to have a Health Savings Account. These accounts act as a financial nest egg to cover medical expenses. Individuals can save $3,400 of tax-free money every year that rolls over if not spent. Families can save $6,750 of tax-free money. Often times, an employer will contribute money to the Health Savings Account which basically amounts to free money! Best of all, if you stay relatively healthy and budget healthcare costs wisely, you can save the Health Savings Account as a retirement benefit. Regardless, when you pay for medical expenses with the Health Savings Account, you are automatically saving money because you are spending tax free money.
Another benefit is that many preventative services are covered with no cost to the insured. For example, annual physicals, certain immunizations, and other services based on age and risk factors are covered without any added cost to the insured person.
Merging with Direct Primary Care……
Lastly, a high deductible plan can be joined with an additional service called Direct Primary Care (DPC). Direct primary care is a membership-based service that provides the majority of medical care most people need in a typical year. There are many different direct primary care programs across the United States but I’d like to highlight one from a company called Next Direct.
Next Direct charges one flat monthly fee that includes everything from office visits, procedures, even some diagnostic testing for no cost. The program offers convenience because members can contact their doctor by phone, video call, text or come in to the office if necessary. Another benefit to a Next Direct Membership is the substantial discounts on laboratory testing and prescription medications. Members pay anywhere from 75-95 percent less for those items than they would otherwise.
Revisiting the HDHP……
Let’s go back to the high deductible plan for a moment. When you seek medical care and are billed for the service, you are charged according to something called a “Fee Schedule”. The fee schedule is the charge sheet for all of various services offered by a doctor’s office or hospital. That probably makes sense but what won’t make sense is that the Fee Schedule is different from one office or hospital to the next. It is different from one health insurance plan to the next. It is almost impossible to know what you are being charged for medical treatment until you get the bill.
The important thing to know about the Fee Schedule, is that when you use health insurance for medical care, you are locking yourself into the Fee Schedule for your particular plan. You are essentially taking a gamble that you are paying a fair price and if your casino luck is anything like mine, that is a bad bet! In fact, it usually means that you end up paying much more for medical care.
For example, let’s say you go to the doctor’s office for a sore throat and use your high deductible health insurance. You generally won’t pay anything when you receive care. The doctor’s office will submit all of the different charges to the insurance using their Fee Schedule. We can consider average fee schedule charges for our example. The office visit with the doctor including a charge for a strep throat swab would cost around $300. Under your plan, if the deductible hadn’t been met yet, you would receive a bill in the mail for $300 from the doctor.
To wrap things up, I want to highlight one last important point. The vast majority of insured people with any type of deductible health plan, rarely spend the entire deductible each year. This means that when they do seek care and use their health insurance, they are paying more than needed for that care. The end result is that the insurance companies win and the insured pay more.
Fortunately, the insurance company doesn’t always have to win. People who invest in healthy living, take advantage of the benefits in a Direct Primary Care Program and who maximizing contributions to a Health Savings Account can make the high deductible health plan can be an excellent choice.
Features of a High Deductible Health Insurance Plan:
- Lower monthly premium
- Higher deductible (typically at least $2,500 a year for individuals and $5,700 for families)
- Certain HDHPs be combined with a Health Savings Account
(HSA) to help pay for medical expenses
- An HSA allows you to save money to pay for things like a doctor visit (copay) or prescriptions
|Step 1: Pay your monthly premium
|The amount you pay each month for insurance coverage.
|Step 2: Meet your deductible
|For certain medical services and prescriptions, you pay this every year before your plan will pay for eligible charges.
|Step 3: Pay a copayment
|An upfront fee you pay to a doctor for medical services.
|Step 4: Pay coinsurance
|A percentage of charges that you pay a provider or facility after the deductible has been met (most commonly, 80/20 coverage).
|Step 5: Out-of-Pocket Maximum
|The maximum amount you will pay out of pocket on an annual basis (consists of your deductible, coinsurance, and copayments). If you meet the out-of-pocket maximum, eligible charges for most services are covered 100% for the rest of the year.