Premiums, deductibles and co-pays, oh my! Decoding modern day healthcare

Posted by on Dec 21, 2016 in Uncategorized | 0 comments

Decoding Modern Healthcare Plans
Health insurance has probably never been more confusing than it is now. There are many variables to consider when purchasing health insurance and despite government attempts to simplifying the process, it is very easy to get confused about what plans actually cost. By understanding some of the basic principles and vocabulary of health insurance, you can approach the decision with the tools you need to choose correctly.

Understanding the Premium

A health plan’s premium, or monthly payment cost, is often one of the most obvious and important determining factors when purchasing health insurance. It is certainly where many insurance buyers start, although it is definitely not where they should stop their investigation. It is important to shop around for the best plan.

The affordability of a plan is often determined by the premium. This monthly rate is affected by myriad factors.

The most common factors include:

  • Age
  • Location
  • Family enrollment
  • Tobacco use
  • Type of plan

Premiums are also heavily influenced by The Affordable Care Act, which completely altered how health insurance is offered and paid for. It may be important to have a good understanding of the Act when shopping for health insurance, but the basics are not terribly hard to understand. Essentially, if you live in a state that offers insurance plans through health insurance exchanges, the government will pay a portion of the premium costs as a tax credit. This is what makes these plans affordable for most people. It is worth noting, however, that the options on these sites depend heavily on where you live, and most have seen a huge departure of providers recently.

Your premium is also what is most likely to change over time. A person can expect their premium to increase even if they remain perfectly healthy and never go to the doctor. Premiums can also be heavily influenced by market factors and may rise or lower sharply depending on the overall insurance market.

You will want a low premium if:

  • You rarely use medical services
  • You are comfortable with a higher deductible
  • You take few or no medications
  • You are younger
  • You have a low risk of injury

Understanding the Deductible

The next major part of any insurance plan is the deductible. The relationship between premium and deductible are almost always inverse. As premiums lower, deductibles go up sharply. This is where many “affordable” low premium plans can very quickly drive a person to bankruptcy.

A deductible is essentially the amount of money a person has to pay before their insurance provides any coverage. Usually, deductibles are cumulative for the year, so if you have many small procedures you will still eventually hit the deductible amount.

You will want a plan with a low deductible if:

  • You do not have significant savings
  • You live paycheck to paycheck
  • You have a high-risk profession or hobby more likely to result in significant injury
  • You are okay with paying higher premiums

Understanding Co-pay

Most health insurance plans also have a co-pay, although it is possible to find plans with a zero co-pay. This is an amount of money, usually $20-$50 that a person must pay for each service such as a pharmacy purchase or doctor visit. The person begins paying co-pay after they have reached their deductible or if their plan has no deductible.

You would want to choose a plan with a low co-pay if:

  • You have many routine procedures or checkups
  • You have many pharmacy prescriptions to fill
  • You have kids, since they are more likely to go to the doctor regularly

Coinsurance

One way some insurers approach cost-sharing of plans is to use coinsurance. This form of plan often allows premiums to be much lower without having massive deductibles. The offset is that the person must pay a percentage of all services forever. There is no point at which the insurance will cover everything. One exception is that many plans have a coinsurance cap, or maximum amount a person will pay in a year. After they hit that cap, the insurance will cover at 100 percent. The percentage of coinsurance can vary widely.

By doing a thorough investigation of various health plans offered by providers, it is possible to find a plan that fits your budget and health needs. Each part of the insurance plan plays an important role in the cost of that plan and there is usually no one plan that is superior to all others. Considering individual needs is most important. There are many resources available to help consumers cut their insurance costs that are worth considering.