Shopping for health insurance can be confusing. Insurance companies seem to speak a different langauge and often present information in misleading ways. Here are the 5 things to look for when shopping for health insurance and some tips to make sure you understand what you are buying.
#1. Annual-out-of-Pocket-Limit (Maximum):
The Maximum is the first thing you should look at when evaluating health insurance coverage. It is your worst-case-scenario: The amount you will likely pay if you are hospitalized, need surgery, or have another catastrophic event. Once you have reached your maximum, your insurance company will pay 100% of your eligible medical bills.
Note: With most insurance plans you are still responsible for office visit and Rx co-pays, even after you have reached your maximum.
#2. The Deductible:
Not as important as the Maximum, you should still be aware of a health insurance policy’s Deductible, which is the amount you are responsible for at 100% before your insurance company starts paying a percentage of your medical bills.
NOTE: Many health insurance policies misleadingly advertise low deductibles that actually aren’t that low. For example, many Anthem Blue Cross and Blue Shield health plans advertise deductibles ranging from $400 all the way up to $5,000 but if you read (and understand) the fine print, the true deductibles on those plans are actually thousands of dollars higher.
After you have reached your Deductible, but before you have reached your Maximum, you are responsible for paying Co-Insurance, which is represented as a percentage (%). You are responsible for paying this % of your medical bills until you have spent enough to reach your maximum. Due to the high cost of medical bills, Co-Insurance is not as important as it used to be, since a catastrophic event is likely to cause you to reach your Maximum, regardless of your co-insurance.
Co-Insurance Example: Suppose you had a $1,000 deductible, 30% co-insurance, and a $5,000 maximum. If you received a $10,000 hospital bill, you would pay the first $1,000 (your deductible), then 30% of the remaining bill until you hit a total of $5,000 (your maximum). In this case, the total would $3,700: $1,000 (deductible) + $2,700 (co-insurance: 30% of $9,000) = $3,700.
#4 Doctor’s Office Co-Pays:
Doctor’s Office Co-Pays are what you pay to see your doctor. This Co-Pay covers your consultation only – you can still be charged for services performed in your doctor’s office such as lab-work and small surgeries (like a mole removal by a dermatologist). Many health insurance plans offer a limited number of office visits -ranging from 1-5 per year- which helps lower the monthly premium.
#5. Rx Deductibles and Co-Pays:
Most health insurance plans have completely separate drug coverage. Generic Rx’s are available at a small co-pay but brand name Rx’s typically have a separate brand name Rx deductible you must reach before brand name Rx’s are available at a co-pay. Brand name deductibles range from $150-$750 but many new plans have brand name deductibles as high as $7,500 (and some plans don’t cover brand name drugs at all).
Other generally less important but still notable things to look for:
- Hospital, ER, and outpatient surgery co-pays. These are often in addition to your deductible.
- Physical and Mental therapy limits: A cap on the number of physical and mental therapy visits you are allowed per year.
- Maternity Coverage: In California, all new plans cover maternity. If you are out of state or are on an older plan, check to see if the plan covers maternity.
The most important components of a health insurance plan ultimately depend on each individual’s preferences and medical needs. It’s best to consult with a broker to discuss your options (and the fine print).