Getting the most from your new insurance
Confused about your new plan? Don't fret. Even folks who've had coverage for years can be unclear about concepts like cost sharing.
January 11, 2014
If you are one of the people who have signed up for Obamacare recently – either through a federal or state exchange, or directly with an insurance plan – you may need some help figuring out how to use your new benefits.
The media have focused on the cost of the monthly premium. How much would you contribute per month on the various plans and would you get a subsidy for that monthly premium? But that is just the tip of the iceberg of how insurance works.
One of the most recent studies about what people know about their health insurance confirms that it’s complicated – and even having a Ph.D. doesn’t help you to figure it out. A recent study by George Loewenstein of Carnegie Mellon about how well participants understood four concepts – deductibles, co-pays, co-insurance and out-of-pocket maximums– revealed that participants thought they knew more than they actually did. (You can take the quiz here.)
Analysis of responses revealed that while insured Americans felt confident about their own understanding of these concepts, their actual understanding was much lower; only 14 percent of all respondents accurately understood all four concepts.
Even people who have had insurance for years don’t always understand how the “cost sharing” works.
To make it very simple, the deductible is generally the amount you must pay before your plan pays anything for the services you receive. (There are exceptions noted below.) Most PPO plans have deductibles. In Obamacare, the deductible varies in the different plans in the opposite direction of the premium – that is, the lower the premium, the higher the deductible and vice versa. When most people looked at the exchange plans, they saw four plan options – Bronze, Silver, Gold and Platinum. Since the lowest monthly costs were in the Bronze and Silver plans, many insurance seekers probably didn’t check out the plans with the higher monthly premiums.
While the Bronze plan has the lowest monthly premium cost, it also has the highest deductible – $5,000 (for medical and drugs) in most cases. For a 32-year-old in California with an annual salary eligible for a subsidy, the monthly might have looked attractive – low $200s per month. But that individual would have to pay $5,000 before they received any benefits from their insurance plan (except for preventive care, which has no deductible in any of the plans). After that, they would have to pay flat dollar amounts per service (copays) or a percentage of the negotiated cost of care (co-insurance) before their insurance kicked in 100 percent.
The Silver plan offers a more generous option. In the California exchange, the medical deductible is $2,000 and the brand drug deductible is $250. And here is where some may have missed the “good stuff” about the Silver plan. If you have a Silver plan, you can still see a primary care doctor for a $45 copay and a specialist for $65 without meeting your deductible. If you have a generic drug, your copay is only $19. All these copays count toward your annual out-of-pocket maximum. (More on that in a moment). The Silver plan also offers discounts on the deductible, depending on your income.
The Gold and Platinum plans don’t have ANY deductibles but you still pay something (copays) for visits to doctors and lab and hospital, and these plans have significantly higher monthly premiums for this lower cost sharing at the point you seek service.
But the most important “cost” information of all may be the least understood. The “out of pocket maximum.” In Bronze and Silver plans, the most you would pay – on your own, out of your own pocket – would be $6,350 as an individual. (For Silver plans, this may be lower depending on your income level). Only the Platinum plan would offer an out-of-pocket max for less – $4,000. That is the number you need to focus on.
If you have a hospitalization or need expensive medication or break a bone and need acute care and rehabilitation, your care could get quite expensive. While you may be able to pay your monthly premium, you need to be able to fund the deductible limit and the overall out-of-pocket maximum if you need care beyond a doctor’s visit.
What’s covered? What’s not?
Once you understand the four legs of the cost-sharing stool (deductibles, copays, coinsurance and out of pocket maximums) there are a few other things about your insurance that you may want to know about.
The good news first: The Affordable Care Act requires that every plan offer 10 essential benefits, some of which are not provided in many current individual insurance plans (rehabilitation for an injury, prescription drugs, mental health or substance abuse treatment, maternity care).
But there are services that are not covered in the exchange plans such as alternative treatments like acupuncture or chiropractic (check your state exchange plans because the coverage of these services varies), cosmetic surgery, lasik surgery, long term care, and infertility treatment. A “comprehensive” benefit plan like Obamacare doesn’t mean that every service you want will be paid for, but it is likely to be a whole lot better than the individual plan you had before.
Before you select your plan, there’s one more aspect of insurance “below the surface” that you need to check out – what hospitals and doctors are in your “network”? You may be quite surprised that a physician or leading academic medical center in your community has been excluded from the network of your plan.
Why would that occur? Most, simply because the center or physician would not accept the negotiated rates the insurance company offered them. Such academic hospitals are often more expensive than community hospitals, and for some good reasons. The research done at these centers costs money, and if you have a complex condition, you may need that type of expertise.
Don’t assume that if a hospital or physician is more expensive, however, that they offer higher quality care. They may not. Even if some providers are not in your network, you may still be able to see them, although it may cost you more.
Your takeaway from all of this may well be, “Let’s move to single-payer insurance.” While some aspects of a single payer program might be simpler, our “single payer” program, Medicare, is not without its complications or cost sharing.
Besides, we are not going to do away with private insurance any time soon in the United States, so we all need to know how to make the system work as well as it can. It was certainly way worse before the ACA when insurance companies could deny you coverage for a pre-existing condition. At least the ACA is making insurance companies compete on the same set of services and play by the same rules.