Walking home from work, paying more attention to the text from your granddaughter about her first days at college than you are to the pavement, you accidentally step on a small rock. It rolls, your foot slips out, and suddenly the sidewalk cement is greeting your body full force. The crack you hear in your right arm, near your shoulder, is intimidating. You hear a voice asking if you are OK, as darkness takes over.
The next few days are a blur. There’s an ambulance, a few X-rays (or was that an MRI?), a minor surgery to stabilize your arm, and you are sent home with some opioid drugs, which make you obliv i ous to the pain. A week later after the check-in visit, the doctor says you need to have a total reverse arm surgery at a price tag of $18K for the surgery and $20K for the implant … and he’d like to schedule it for 3 weeks from now, Thursday at 9 a.m. All you need do is to set up the appointment with the front desk.
At home, the walls close in on you. Who will pay for this? Will insurance cover anything? Medicare? Do you really need the surgery? How do you get another opinion? Can you talk to a specialist? What if you need home care afterwards, maybe physical therapy? Your spouse passed away last year, and your entire family lives four states away.
Don’t panic. Close your eyes, breathe deeply, and take it one step at a time. You can figure it out.
The above scenario is, purposely, U.S.-centric, as is the rest of this article. If you live in a country with national health insurance or with a health insurance system that is different from the U.S.’s, the details that follow will explain the U.S. system (as it stands as of January 2017) and provide useful definitions of health insurance terminology.
No insurance is ever completely free. The very first step is to determine what insurance consist of … how things are paid. All insurance considerations have the same common elements and a variety of possible charges that are generally bucketed into the following areas:
- The insurance company, also called a payer
The exact details of the elements of insurance a person has will dictate the amount of money that will be paid by the patient versus the insurance company, also known as a payer .
Premiums are the amount an individual, a family, or a business pays for an insurance policy. Policy agreements are usually set up on an annual basis, with the premium for the year billed monthly. Many businesses will cover a core part of the premium, passing on a lesser amount to their workers. As payers raise their rates, businesses often pass on a percentage of the increase on to workers. There are many laws in place about how much each business needs to pay; the percentages change based on the size of the company.
There are also laws in place dictating how an insurance com pany may set the premiums. An individual’s health, medical history, and gender are not allowed to affect the premium. Instead, the payers may only use age, geographic location, use of tobacco, individual/family enrollment, and the plan category to set the price. While there are no federal regulations regarding limits or caps on amounts, some states have enacted legislation. The Patient Protection and Affordable Care Act (ACA)—also known as Obamacare—has established the process. It does not set the rates.
Curious about the laws and changes? Want to know what some plans in certain states are proposing for rates in the future? The National Conference of State Legislators (ncls.org) is the place to visit. It has also been tracking changes such as the Protecting Affordable Coverage for Employees (PACE) Act (ncsl.org/research/health/health-insurance-rate-approval-disapproval.aspx).
Individuals pay less than a family. Some payers charge less per person as more people are included in a family plan, en couraging consolidation and plan-sharing. The actual amounts are based on the plan type.
Type? Perhaps the phrase should be metal . The regulations in place dictate that a payer may offer no more than five different plans. The plans with the lowest premiums are the bronze plans. The monthly rates are low, but the costs are the highest if actual care is needed. Silver plans are next, then gold, and last comes platinum. Rates to the platinum plans are the highest, but care is usually the most expansive and the deductibles are the lowest.
Information on all these plan types, criteria, and a quick cheat sheet chart is available here: healthcare.gov/choose-a-plan/plans-categories.
The fifth plan type, and the one without a metal color, is the catastrophic health plan. Strict criteria apply in order to get these plans, such as being under 30 or not being able to afford a regular plan. All costs are paid by the patient for every visit, and the deductible is an amazingly high: $6,850. These plans are designed to be used only in a cat astrophic event, the worst-case scenarios. This plan is so unusual and so uncommon that it needs to be treated on its own—and will therefore not be covered in the rest of this article. More information, including how to reach out to someone in your individual state, is located on the Healthcare.Gov website: healthcare.gov/catastrophic- plan-information.
Deductibles are often the hardest part of a health plan to understand. The concept is easy to grasp: “The amount you pay for covered health care services before your insurance plan starts to pay” (healthcare.gov/glossary/deductible). If someone has an annual deductible of $1,500, that person pays for the first $1,500 of all healthcare coverage (minus medication copays) for office visits, emergency rooms trips, X-rays, blood tests, and basically anything else. After the annual deductible amount is reached (regardless if it takes 1 month or 10 months), the payer begins to cover the expenses. The amount (all expenses or a proportion) is based on the type of insurance plan for each patient.
A family will usually have a larger deductible, perhaps $2,800, but all members in the plan are under that amount. If one child costs $1,200, another costs $600, the amount is $1,800 of the entire deductible amount of $2,800. This is another reason why many families opt for a single plan. Some family plans have a combination of individual and family deductibles. This aspect will vary by payer and plan type, as will the amount of the deductibles.
The reality of deductibles is usually more complex. Visits deemed to be “general wellness visits” or “preventative care visits” are almost always covered 100% per the ACA. The patient pays nothing, so nothing goes toward the deductible. The actual services covered vary based on whether a patient is an adult, a woman, or a child. In general, these services are flu shots, blood pressure screenings, diet counseling, and some immunization vaccines. More services regarding pregnancy are covered for women, as well as specialized tests for children. A complete list of services types is available on the Health and Human Services website of the U.S. government (hhs.gov/healthcare/facts-and-features/fact-sheets/preventive-services-covered-under-aca). This list provides only the concept of what is covered. It does not give any specifically named tests or brands of tests covered, as that would imply the U.S. government is endorsing a product. The government never endorses a name-brand product or company.
The deductibles start to get confusing after the first visit. Take Molly, for example. She is 40-plus years old, so her annual mammogram screening was covered by her healthcare plan. However, there was an unclear area in the resulting image. She was asked to come back for a biopsy. She did so and, happily, the results were clear. She was fine—until the bill arrived. Her payer had determined that the mammogram was a preventative service but the needle biopsy was deemed a treatment . This meant she had to pay for all of it until her deductible was met. The cost? About $650 out of pocket based on her plan coverage.
Once the deductible amounts are met, the patient pays a copay for health services beyond office visits. The copays vary by plan type and by treatment. Some plans have a $20 copay for the non-general wellness visits but $150 for visits to the emergency room. Often those fees are waived if the person is admitted, but not always. Two people under two different plans may pay completely different amounts, which is why people need to decide in advance just how sick they think they will be in the coming year.
The copay is almost always a fixed amount and is printed on the medical benefits card each patient is given for their health insurance. Copays are paid before treatment is given, unless in an emergency situation. In emergencies, the patient receives the necessary treatment first and then administrative paperwork is dealt with after the crisis.
People need to enroll in the plan which they feel will best meet their needs. If you think the year will be complex with multiple disease diagnoses and medications to take, it would be smarter to pay more up front with premiums yet save more long-term when the expenses grow. Healthy peo ple with minimal conditions may prefer to enroll in a more basic, no-frills plan to keep down costs throughout the year.
Coinsurance is, to some extent, a copay. It’s the patient’s share of the cost of a healthcare service and is almost al ways a percentage of the amount the payer is charged for the medical treatment. Because it’s flexible and determined after a visit/treatment is done, however, it’s charged separate from a copay and is therefore given a different name for clarity. It also doesn’t take effect until after the deductible is met. The per centage is determined by the plan type, of course, but is often in the 15%–30% range. The higher the monthly deductible, the lower the percentage a patient pays in coinsurance. For sick people with many medical treatments, keeping the percentage low may save money over a longer period of time, even if the monthly deductible is high.
So, for Molly, her first physician visit was a wellness check-up, so it cost her $0 for the visit and she had no copay. The mammogram was covered as a preventative service, so again, she paid $0 and had no copay. The needle biopsy was a treatment, so there was a $20 copay in addition to the biopsy cost, which was $650, as she had not met her deductible. She ended up having a more complex surgical biopsy, which meant another $20 copay and a cost of $3,500. Since her deductible was $2,200, and she had already paid $650, that meant she paid another $1,550 out of pocket. That left $1,950, which was split with her payer as a coinsurance, for which she paid an additional 30%, or $585. The final medical result was negative: She did not have any cancer.
In short, the entire situation with multiple visits, tests, and bills is summed up as follows: $20 + $20 +650 + $1,550 + 585 = $2,825. (This is in addition to the monthly premium amount she pays during the course of the year.)
The main driver of the overall costs a person pays, besides one’s personal health, is based on the type of plan a person chooses.
The next step in the process of understanding what to do is determined by what insurance you may have. These are the main types:
- Medicare (older than 65)
- Medicare Supplemental, or Medigap
- Medicare Advantage
- Medicaid (younger than 65, low income)
- Children’s Health Insurance Program (CHIP)
- Commercial/Third Party
- Veteran’s Administration insurance
- Cash (no insurance)