How to Shop for Health Insurance
I Came Across this on WSJ’s Guide site and i know You’d love it. It’s impossible to say exactly what kind of health insurance to get. There are many variables that make a plan right for someone, so it’s a decision you have to reach on your own. But there are some basic guidelines and terms to know. This guide is to help you save money and spend wisely when you’re shopping for health insurance.
A health management organization, or HMO, is a plan that provides patients coverage within a network of doctors. In an HMO, a client typically chooses a primary care physician (PCP) to be the regular doctor and issue referrals to specialists (also often members of the HMO) if necessary. Sometimes these have lots of restrictions — if a specific doctor you want to see isn’t part of the HMO network, you’ll have to shell out the cash.
A PPO, or preferred provider organization, is a network of physicians and specialists who have worked out a negotiated rate with your insurer. Although they grant more flexibility to the patient, they often come with higher copayments and other costs.
When selecting private or employer-sponsored health insurance, some people focus on just the annual deductible or the amount of coinsurance, or copayments, that you’ll be making. Some pay little attention to the premium, since that’s a relatively small amount of money that’s automatically deducted from your paycheck. But a $2,500 deductible, or 90% coinsurance versus 70% coinsurance sounds like a much bigger deal, doesn’t it?
Well, it may be, or it may not. Take that high-deductible plan mentioned above: If you go to the doctor once a year, and that visit costs you $200, your total health care costs for the year are the doctor’s visit, plus your premiums for the year (say, around $600 annually). So you spent $800 on health care. Now, if you had gone with a PPO plan, you’d have only paid a $20 copay for the doctor visit, but your premiums would cost you $1600 a year.
Again, it’s not that one plan is materially better than another, but you have to look at all the angles. What’s more important to you? Overall cost? The ability to get some coverage wherever you choose to get care? How much hassle it takes to get things done? There’s no such thing as the perfect health insurance, but hopefully you can get pretty close.
In order to make the right decision, you need to understand your basic options. We’ve defined and described below:
HMO (Health Maintenance Organization) – One of the cheapest options, HMOs don’t cover any of your costs if you see a doctor who’s not in the organization’s network of physicians. HMOs aren’t your best option if your beloved internist or dermatologist is not affiliated with the HMO on offer. Also, HMOs require you to select a primary-care physician, which means you must obtain a referral from him or her before you can see any specialists, a policy that keeps costs down but delays you in getting care.
If you like the doctors in an HMO’s network, it’s mighty simple and cheap: There’s no deductible and most routine procedures are covered at 100% once you fork over a small copay. No muss, no fuss.
EPO (Exclusive Provider Organization) – This plan is basically an HMO, but with a nationwide network as opposed to a regional one.
PPO (Preferred Provider Organization) – This plan also has its own network of doctors, and when you use them, the plan functions mostly like an HMO (small copays, extensive coverage). But you don’t need a PCP (shorthand for primary care physician) for referrals — so you can schedule appointments with any doctor at any time. Plus, you have the option to use a doctor who’s not in the network and still get some coverage (it’s customary for a PPO to cover 70% of out-of-network visits). If want the widest selection of doctors, a PPO is your best choice, but you’ll pay for the privilege: PPOs tend to have some of the highest premium costs.
POS (Point of Service) – This is basically an HMO that lets you see an out-of-network physician. You’re still required to have an in-network primary-care physician, and you still have to go to your PCP for referrals. But if you see an out of network physician, the plan covers some of the costs — just not as much of the costs as a PPO would provide. POS copays tend to be low, too.
High Deductible/Catastrophic/Safety Net Plan – This option goes by many names, but the concept is simple. If you don’t need (or can’t afford) a doctor on a regular basis, but want protection in case you get hit by a car. The deductible for these plans is high — usually around $2,500, compared with $250 for a PPO or $0 for an HMO. But once you pass that threshold, coverage kicks in at 100%. These plans carry the lowest premiums, as much as one quarter the cost of the most expensive PPO, if your deductible is sky-high.
Coinsurance – In some types of health plans (such as PPOs), your insurer doesn’t pay the whole medical bill. They pay part of it, you pay the rest.
Cobra – A government program (Consolidated Omnibus Budget Reconciliation Act) that allows people who leave their job or who get laid off to continue using their previous employer’s health plan for up to 18 months after they stop working there. You have to pay the full price of your health plan all by yourself; your employer no longer covers the usual 70-80% of the premium. This can lead to huge bills, but it may be better than having no insurance at all or having to change plans while you’re in the middle of intensive medical treatment.
Copay – Short for co-payment. Almost every type of insurance requires you to spend between $10 and $50 when you see a doctor. Copays can, in many cases, be applied to your annual deductible.
Deductible – In many plans your coverage doesn’t kick in until you’ve shelled out a certain amount on health care each year. That amount is called the deductible, and the figure could be anywhere from a couple of hundred to a couple of thousand dollars, depending on your health plan.
Once you’ve “met” (paid) your deductible, you get all the coverage, discounts and benefits your health plan offers. Until the next calendar year, that is, when you have to start back at zero. Keep in mind that your health-insurance deductible is not like a car-insurance deductible: It’s not negotiable, and your insurer can’t raise your premium if you use it. It’s just the first batch of money in your plan that you’re responsible for—everybody spends all or part of his or her deductible each year.
EOB Form (Explanation of Benefits Form) – This looks like a bill, but it’s really a price tag. Health care is one of those rare industries where you buy things before you know how much they cost. The EOB is supposed to show you how much the doctor charged the insurer, how much the insurer is paying the doctor and how much, if any, is left over that you have to cover yourself. Once you see what the EOB says you might owe, then you wait for the doctor to bill you for it. Sometimes doctors don’t bother at all; other times, they may wait weeks or months after they get payment from the insurer to turn around and bill you.
Many EOBs are inaccurate. That’s why it’s best to wait for that doctor bill before sending money anywhere (sometimes things just sort themselves out in the background). But it’s not a bad idea to call your provider and verify the charges on any bill before you pay, especially if you’re confused about something.
HSA (Health Savings Account) – Imagine that the money you used to meet your deductible came from an account that you fund with pre-tax dollars. That’s an HSA. ***UPDATE*** In 2007, you could set aside up to $2,850 a year to pay for medical expenses (families get up to $5,650).
Contributions could come out of your pre-tax paycheck, or, if you’re self employed, you’ll basically give yourself a nice tax credit. If you have a balance in your account at the end of the year, it carries over into next year. You can only withdraw this money to use for health-related expenses; otherwise you pay a penalty. But you can let the money sit – and invest it – to use for, say, expenses in retirement decades from now. That’s why it’s an especially good thing for younger workers with have lots of time to watch the money grow.
FSA (Flexible Spending Account) – This is a supplemental account you can have when you’re enrolled in an HMO/EPO or PPO (people enrolled in health savings accounts aren’t eligible). Like the HSA, it allows you to set aside pretax dollars, which you can use to pay for doctor and prescription copays and other qualified medical expenses. The difference is that you must use the money by the end of the year or risk forfeiting it, though many plans give you a grace period until March 15 of the following year.
Network – Most plans have some sort of a group of doctors, hospitals and other healthcare providers that they call a “network.” The most important thing about a network is that those providers and your insurer have agreed on how much insurance companies will pay for various procedures and treatments. Since all fees are set in advance, there’s no matter of “reasonable, usual or customary,” terms that insurers use to describe what you should or shouldn’t cover. What your doc charges is what your insurer will cover.
Out-of-pocket maximum – Basically, this is how much you can spend before your plan starts paying for 100% of everything. Even after you’ve met your deductible, you’re still responsible for coinsurance and copays. So, as an example, let’s say that you’ve met your plan’s $500 deductible, and then you get caught in a thresher. The hospital bills add up to $90,000. If you didn’t have an out-of-pocket max, you’d still be on the hook for co-insuring, say, 20% of your hospital costs, or $18,000. But since your plan has an out-of-pocket maximum, you’re only on the hook for $2,500 (as you’d already spent the $500 in meeting your deductible).
Pay special attention to the out-of-pocket maximum. You want to make sure that, if something very bad—and very expensive to treat—happened to you (or a member of your family, if you’re all on the same plan) that you’d be able to cover the maximum amount before insurance would pick up the rest.
Prescription drug programs – Your health plan may run its own prescription-drug program, or it may contract it out to a third party. If that’s the case, the terms of your drug plan are still set by your health plan—the third party is just fulfilling the order. If your health plan says generic prescription drugs are $15, then they are $15 no matter where you buy them.
The only time this price changes is when it’s in your favor: Many health plans have a mail-order option for pills you take regularly. Getting drugs through the mail can cut your prescription costs by a third or more. This can also be more convenient, since refills happen either automatically or you can confirm them online.
Primary Care Physician – This is your main doctor, the person you go to for checkups and normal illnesses. HMOs and some others types of plans require you to have a PCP who directs your care and refers you to other doctors. If you’re required to designate a PCP, you often can’t see any other doctors without a referral from him or her. Other types of plans don’t require a PCP.
Reasonable, usual and customary – When an insurer says, for example, they’re going to cover 70% of hospital costs, that’s not necessarily 70% of the bill—it’s 70% of what they think you should have been charged.
So once you know your way around the lingo, consider:
Your health history and patterns: Are you diabetic? Do you take any prescriptions? Are you at a high risk for a disease that might require lots of testing? If you have high medical needs, it’s likely that you’ll need higher coverage.
What’s coverage like for your family? What are the medical needs of your family? How does coverage from your employer compare to that of your spouse’s?
How does new coverage compare to your previous coverage? Switching coverage might involve changing family doctors or where you pick up prescriptions.
Crunch the numbers. Do some old-fashioned cost-benefit analysis and see if you’re going to get more for your money. If possible, consider a health savings account (HSA) that might alleviate some of the extra costs.
Individual insurance can be pricier. Going rogue on health insurance can cost patients more out of pocket since a company isn’t subsidizing some of the price. Generally, your employee-sponsored plan is a better bet, but if you’re on your own, even a high-deductible policy is better than no coverage at all.