Deciphering the terminology used by health insurance companies can be confusing and vexing.
The sea of gimmicky marketing buzzwords is piling on each year, resulting in making consumers do more research before they sign up for a plan. Ensuring that the plan you chose will cover all your health care needs is critical or you could be stuck without your favorite doctor for a year or an expensive prescription drug plan that you rarely use. Open enrollment ends on January 31, 2016.
Here’s guide to help you wade through all the buzzwords.
Premium: This is the monthly fee to keep your health insurance current.
Copayment: The copay is the amount you have to pay when you see a doctor or pick up a prescription drug. Here’s the catch and why you need to read the small print. Insurance companies are aware that too many people examine plans by looking at the deductible and primary visit copay only, said Jack Hooper, CEO of Take Command Health, an online health insurance exchange based in Dallas. Now it’s become popular to use copays to help market plans, but “consumers should beware,” he said.
Some plans offer “two visits for $40 copay,” but the coverage behind it is limited. The copay only covers the office visit and since all your preventive visits are free, if you see a doctor to trigger the $40 copay, it’s likely you are ill or injured. Consumers will have to pay for strep tests and other diagnostics that are not covered under the office visit copay, he said. The “two” just means you get two office visits for $40 and then pay full price for the third and subsequent visits.
“Don’t be shocked when you walk out with a big bill,” Hooper said. “I think people will be mad when they get a $100 or higher bill.”
Copays can come in various forms, so it might cost you more than you believed. An office visit might have a $20 copay, a prescription drug could have a $25 copay and ambulance rides or ER care might require a copay of $100 to $250, said Nate Purpura, vice president of consumer affairs at eHealth.com, an online health insurance exchange based in Mountain View, Calif.
Another factor to consider is that a full-price office visit is usually between $80 to $120, he said. A $40 copay may not be that helpful for your budget since your premiums will be higher each month.
Instead of paying $200 more a month for a plan with a lower copay, go for a high deductible plan with "no charge after deductible," Hooper said.
“Remember, your preventive visits are free and you'll pay more if you're sick,” he said. “It stinks to pay $120 when you visit the doctor for a cold or minor injury, but you're saving $200 a month. Unless you're going to the doctor every month, you're wasting money focusing on the deductible and not the actual out of pocket cost and maximum out of pocket cost.”
Many consumers do not realize copays do not count toward the deductible. This might be a minor issue if you have to see your doctor a few times, but some plans include a $500 copay for ER visits. This does not mean a visit to the ER will only cost $500. If you chose one of these plans with a $4,000 deductible and sprain an ankle and need X-rays and head to the ER, the average cost is $1,500, Hooper said. The visit will cost $500 and the rest will go toward the deductible. A consumer will wind up paying the full $1,500 and only $1,000 will go towards your deductible, which means you still have $3,000 to go, he said.
“This isn't a big deal for $20 office visits and $40 labs, but we're starting to see plans this year, particularly from Blue Cross Blue Shield that have the $500 copays for the emergency room,” Hooper said. “You're going to get a bill for three times what you're expecting.”
Deductible: This is the amount that consumers have to spend out of their own pocket toward covered medical care each year before health insurance companies start paying bills for certain services.
Some plans also have a catch and there is a separate deductible for prescription drugs, said Purpura. The deductible for medical care could be $2,000 and on top of that is an additional $1,000 deductible for prescription drugs.
“Statistically, if you're healthy, you should buy the highest deductible plan with the lowest premium that you can,” said Hooper. “Your biggest risk is a mid-range $4,000 to $5,000 expense which is rare. The minor stuff won't matter and if you get really sick or injured, you'll hit your maximum out of pocket.”
Co-insurance: This is another form of cost-sharing in some plans and is usually expressed as a percentage, said Purpura. A doctor’s visit may be covered with 20% coinsurance, which means the consumer has to spend 20% of the fee from their own pocket and the rest will be covered by the insurance company.
The priority that tends to occur with cost sharing means the deductible comes first most of the time, except for preventive care. Next are copays, which can occur alongside the deductible for certain services, but also can continue even after you’ve fulfilled your deductible, Purpura said. Coinsurance typically comes into play after your deductible has been met for the year.
“Once you reach your maximum out-of-pocket amount for the year, then the insurance company pays in full for all covered medical services,” Purpura said.
Maximum out-of-pocket: Every health insurance plan has a maxim out-of-pocket limit, which is the highest amount a consumer has to shell out toward covered medical care in a single year. In some plans, the maximum out-of-pocket is the same amount as your annual deductible. For others, it may be higher, up to federally defined caps, said Purpura.
This is the true limit that consumers face and what they would have to pay in a year before the insurance plan pays for everything, said Hooper. It is “more important than the deductible in terms of minimizing your financial risk,” he said.
If you will need a lot of medical care such when having a baby, the calculation you want to make is your monthly premium multiplied by 12 months, plus the maximum out-of-pocket, which is the most you will pay in a year, Hooper said.
No charge after deductible: This is mentioned in many plans and confuses consumers who think it means it's free, but in reality, it means a consumer pays full price until he meets the deductible.
“It is one of the most misleading statements,” Hooper said. “The only true ‘no charge’ is generally on preventive care, which is required by the ACA to be included in your premium costs.”