Understanding terms and insurance plans to help you and your patient’s make the right choice
Open enrollment for insurances causes many people stress, confusion, and a feeling that they don’t understand the variables enough to make a good decision. Patients who come for healthcare often do not understand their plan, and either avoid receiving needed services or receive an unpleasant surprise when they are billed. Understanding some of the main terms that insurance plans use can go a long way to picking the right plan for you as well as helping patients to understand their plan during the upcoming year
The Monthly Premium
I find that this is often the first thing people focus on when choosing an insurance plan. This is the monthly amount you will pay for insurance coverage It is important to understand that, in most cases, the lower the monthly premium the higher the deductible will be (as well as other out of pocket costs such as co-pays/co-insurance when you receive medical care). Also, the out of pocket maximum tends to be higher on plans that are lower-premium plans.
There are plans with very low premiums celled “catastrophic plans”. These plans are generally reserved for people under the age of 30 and are experiencing financial hardship. They are created to protect against worst-case scenarios. They have very high deductibles, which means subscribers will need to pay medical expenses out of pocket until they reach this high deductible. This plan is generally meant for those with financial hardships who are “healthy” and do not anticipate needing medical services in the immediate future.
Plans with low monthly premiums are usually a good choice for subscribers who do not intend to use a lot of medical services in the upcoming year.
Deductible (and what services the deductible applies to)
The deductible is the total amount that a subscriber must pay each year before his or her insurance starts to pay. For example, if a subscriber’s deductible is $3,000, then he or she must pay $3,000 toward services that are applicable to the deductible before insurance will pay anything. Once a subscriber reaches his or her deductible, the copay or coinsurance starts to apply (generally until the out of pocket maximum for the year is reached).
A copayment or copay is a fixed amount for a covered service, paid by a patient to the provider of service before receiving the service. It may be defined in an insurance policy and paid by an insured person each time a medical service is accessed. It is technically a form of coinsurance, but is defined differently in health insurance where a coinsurance is a percentage payment after the deductible up to a certain limit. It must be paid before any policy benefit is payable by an insurance company. Copayments do not usually contribute towards any policy out-of-pocket maximum whereas coinsurance payments do.
Many low-premium plans also have high copays. Keep in mind that copays apply even after one has met their deductible.
In health insurance, coinsurance is sometimes used synonymously with copayment, but copayment is fixed while the coinsurance is a percentage that the insurer pays after the insurance policy‘s deductible is exceeded, up to the policy’s stop loss. It can be expressed as a pair of percentages with the insurer’s portion stated first, or just a single percentage showing what the insured pays. The percentage due from the insured can range up to 100% (100% meaning the insured pays all costs until reaching the out of pocket maximum). Once the insured’s out-of-pocket expenses equal the stop loss the insurer will assume responsibility for 100% of any additional costs. 70–30, 80–20, and 90–10 insurer-insured coinsurance schemes are common, with stop loss limits of $1,000 to $3,000 after which the insurer covers all expenses.
Coinsurance is another type of cost-sharing; patients will likely have to pay either a coinsurance or a copay. While copays are fixed amounts, coinsurances are percentages. Therefore, patients with coinsurances will have varying financial responsibility based on what is charged for the services received.
Some insurance plans limit subscribers to certain providers that are “within the network”. When choosing a plan it is imperative that you ensure that you have a wide selection of providers and facilities within your area. Also make sure that your plan includes your preferred provides (or that you are willing to pay the out-of-network rate to see them). If you frequently travel or live in a rural area you may want to consider a plan that doesn’t have network limitations.
Most plans have a limit on the number of visits the subscriber has each year to a given service. For instance, plans may set a limit of 30 visits to physical therapy each year. If you are someone who is going to have surgery in the upcoming year, or if you have a chronic pain issue and generally use a fair amount of these types of services you may want to find a plan that sets a higher limit or does not have a set number of maximum visits per year on these services.
Some plans require you to obtain a referral from your primary care physician prior to seeing a specialist. Be aware if your plan requires this or not, as failing to obtain a referral prior to your service may end up in a denial of insurance coverage for that visit.
Choosing with insurance is “right” for you is an individual choice depending upon many factors. While no one can predict exactly what you may need this upcoming year in terms of healthcare, weighing your options and understanding the variables is vital to coming up with the best plan for you.
Our patients may not understand the plan that they have, and what costs will be involved in their care. By understanding the above terms we are better equipped to explain patients’ insurances to them to allow them to make more informed choices when faced with healthcare decisions.