|
The days of the insurance company simply paying all one’s medical bills are long gone for almost everyone. Nowadays, deductibles are the norm for those using health insurance. By gaining a better understanding of deductibles and other out-of-pocket expenses, people can be better prepared and save some money in medical expenses.
Reasons for deductibles
Health insurance deductibles are more than just a way for insurance companies to avoid having to pay out to the insured; they also put greater efficiency into the system. When people know they will have to pay a deductible, they are more likely to avoid frivolous hospital visits. Also, when smaller claims do not have to be submitted and processed, it saves administrative costs. All else being equal, deductibles lower costs and save everyone money.
How deductibles work
Health insurance deductibles work much the same as deductibles for auto and other forms of insurance. They are a non-reimbursable amount that must be paid by the insured before they can begin to collect from their insurance company for expenses. For example, if someone’s plan has an annual deductable of $1000; they will only be able to collect from their insurance company for the part of their annual medical expenses in excess of $1000.
It should be kept in mind that individual and family deductible amounts are different and that the deductable amount will start over again at the end of the year. Services such as doctor visits may be available without paying a deductible so everyone should examine their plans to make sure they are not paying when they do not need to.
On the other hand, some plans have separate deductibles for prescriptions and mental health services. Even paying the full amount of one deductible will not reduce another.
Other out-of-pocket expenses people face:
Coinsurance
This determines what percentage will be paid by the insurance company and what percentage the insured must pay. For example, if it is a common 80/20 split, the insurance company will pay 80% while the insured will pay 20%. Note that the coinsurance payments start after the deductible has been paid in full.
Copayment
Copayment is similar to coinsurance. However, it is a set amount and not a percentage.
Out-of-pocket limit
On the brighter side of deductibles and other payment expenses, plans generally have a yearly out-of-pocket limit. Once this limit is reached, the insurance company will take up the entire tab as long as the lifetime limit is not exceeded.
Optimal amount for deductibles
Many people regard deductibles as something to be minimized at all costs. While they are obviously not anything people want to pay, simply trying to minimize them is not always the best option. Medical deductibles were introduced to save money and can help the insured too if they reduce premiums more than they cost over time.
With this in mind, when offered a choice, the optimal deductible amount is primarily a math problem that will depend on the circumstances of the insured. Obviously, for those virtually certain to have medical expenses, the minimum possible deductible may be in order. Those who do not usually have medical expenses probably should take the gamble and go for the larger deductible since they are likely to save money that way over the long run.
Also, remember that deductibles can be paid from medical savings accounts, and the tax savings these accounts offer may be another reason to go with a higher deductable.
Of course, the best way to avoid having to pay deductibles is to stay healthy so one does not incur medical expenses at all. Perhaps keeping this in mind can serve as motivation to stay healthy.
While deductibles require some planning, they do keep medicals expenses lower than they would otherwise be. With a proper understanding of what they entail and the different options, medical expenses can help control costs. They are not the only out-of-pocket expense though so everything needs to be carefully looked at.
While health is primary, there are things that are called secondary in health care to include secondary health providers and secondary health insurance. In today’s complicated medical environment, it is important to understand them and know how they should be utilized.
Secondary health providers
Those who provide secondary care are usually specialists who do not see patients unless they have been referred to them by their primary care providers. Examples of these types of providers include cardiologists and dermatologists. These physicians limit their practice in this way either under their own accord or because of payment agreements with insurance providers. Patients who are referred to these secondary health providers by physicians apart from their primary care providers need to insure their health plan covers it.
Secondary health insurance
In some situations, such as those who have two jobs or with married couples and dependents, it is possible to be covered under two plans. This is referred to as having secondary health insurance. There are various rules that apply so anyone who qualifies needs to understand them.
For those covered under two plans, the first step is to figure out which will serve as primary coverage. This is done by the insurers involved. If one is employed, the insurance offered by their own employer will generally be their primary coverage. The criteria used will depend on the types of health insurance and the final decision will rest with the insurance companies.
Both spouses having health insurance does not automatically mean they have secondary coverage. If one spouse has individual health insurance that does not insure others, the coverage will not extend to the other spouse in any way. Since having plans that cover more people is certain to cost more, those using secondary insurance need to consider if the benefits are worth the added expense.
Advantages of secondary health insurance
In some cases, the secondary plan may cover services the primary plan does not. This could be paying for a higher percentage of the care or for services the primary care does not. It also can be used in cases of very serious illness or injury when the benefits from the primary insurer have been depleted. It is necessary to check with the certificate of coverage to see what the benefits are.
Using secondary care
If extra benefits are available from the secondary insurer, the health care provider can bill them once the standard benefits have been received from the primary insurer. However, any health insurance deductibles or other fees from the secondary provider will still be applicable and must be paid. Also, only remaining costs that have not been paid by the primary insurer can be billed.
Words of caution
Apart from considering if the costs are worth it, one should be very careful to be upfront with the insurance providers to avoid any problems collecting. It is also paramount to keep careful records to avoid unwanted surprises. Finally, be sure the healthcare providers are informed of the primary and secondary coverage.
People purchase insurance for peace of mind. Nobody wants to lose everything. With health being the most important thing anyone can have, preserving it should be of paramount concern. This makes purchasing health insurance something everyone needs to do. Considering the cost and health factors involved, this is not a purchase that should be made without careful consideration.
Be prepared for the task
Insurance companies are not exactly known for providing clear and concise information. However, considering the importance and expense of health insurance, understanding exactly what one is purchasing and knowing all the options is critical. There can be gaping loopholes even in good coverage. Those about to purchase health insurance need to resign themselves to some potentially tough reading and research.
Decide what is needed
With prices varying greatly depending on who and what is covered, the first step is to decide exactly what coverage is needed. For cases in which there are two people working, it needs to be decided who will be covered under what plans or if secondary health insurance will be taken out. Consider what coverage will be needed with everyone’s health in mind. Remember that the coverage and conditions will vary greatly with the plan. Be sure to buy what is needed and avoid what is not.
Deductibles and other out-of-pocket expenses
Deductibles can have a huge impact on the cost of insurance. In many cases, going with a higher deductible may be a better buy in the long run. Also, there are other out-of-pocket expenses such as copayments to consider. One has to do the math and make a best estimate as to what kind of coverage will be optimal over the long haul.
With all these potential costs, the lowest premium may not bring the lowest price over time. Carefully check all costs before deciding.
Check location and choice
HMOs and other types of managed care will limit which and the type of medical facilities that can be used. Make sure that the right treatments will be covered and that they will be within a reasonable distance. With the power of the internet, there are also more ways than ever to research the quality of care and other factors.
As a general rule, choice almost always costs more. It is up to the individual as to if cost or choice should receive a greater emphasis.
Employer plans
Since these are subsidized by the employer, they almost always offer the best deal. The plan can be kept but the subsidy will be lost if one changes jobs.
Prescriptions
Prescriptions coverage can virtually be thought of as separate insurance at times. It often has its own deductible and some only cover generic drugs. If taking medications, make sure the plan covers them.
Supplement insurance with healthcare savings accounts
These accounts allow users great tax advantages, and the money in them can be used for deductibles and other costs. Consider their benefits when choosing a plan but keep in mind that certain strings, such as how the money can be used, are attached to them.
Other coverage
There are situations in which one may need insurance out of network or when overseas. Know how the insurance coverage will handle these situations.
Doing the research, finding the right plan and purchasing health insurance consumes time and resources, but the costs of not having proper health insurance are much greater. There is nothing more important than health and one way to protect it is with the best insurance possible.
Health insurance is something almost everyone needs. Being both a necessary and high expense, it is paramount to know the different types of health insurance in order to find the best possible plan to fit one’s needs. This starts with looking at common forms of health insurance.
Although health insurance is very necessary in the modern world, it is a relatively new service. Starting in the 1930s with pre-paid hospitalization from Blue Cross, it grew into the massive industry it is today. The primary force driving this change has been the growing sophistication of medical technology creating more and increasingly expensive medical treatments that keep people alive longer than ever.
Types of health insurance
Traditionally, health insurance centered on indemnity or fee-for-service plans. With this type of insurance, the user is free to choose the physician so there is a lot of choice.
This form of insurance almost always has a health insurance deductible amount that must be paid in full for the year before the insurance can be used. At this point, the patient still frequently must pay part of the bill although the insurance company will pick up the lion’s share. While the company usually pays its portion directly, sometimes the patient is required to pay upfront and is reimbursed later. This will continue until the out-of-pocket limit is reached and the insurance company pays the full amount.
This is still the type of insurance that offers the most choice, but as the cost of medical care has risen, it has changed in some ways and has decreased in popularity vs. other forms of insurance. Patients are still generally free to choose their doctor and services, however, there are more restrictions and patients need permission for some services such as emergency rooms (unless they are unable to make a call). Preventative care is often not covered but restrictions on it have declined as the long-term, cost benefits have become more apparent.
Those using this indemnity insurance must be careful not to deliberately incur expenses that the insurance company might say they are not responsible for.
Managed care
Managed care has come about as a way to try to keep medical expenses under control. This insurance offers less choice but has cost as well as administrative advantages. There are several different types.
With preferred provider organizations (PPOs), patients are offered financial incentives to stay within the organizations network of providers. However, patients are still free to choose specialists outside the network.
Point-of-service plans are a lot like PPOs. Their major difference is that they require the patient go through a primary care physician (PCP) within the network of doctors if they want to go outside the network.
Of all the managed plans, the most common are health maintenance organizations or HMOs. With this type of insurance, apart from special circumstances, patients must use the physicians within the organization. HMO health insurance requires the smaller copayments, less paperwork and offers better preventative medicine. On the downside, there is less choice and often a longer wait time for services. Patients are either assigned or allowed to choose a primary care provider.
Other points to remember
Basically, more managed care brings lower costs but less choice and sometimes inferior service. Also, keep in mind that basic medical insurance covers most types of medical procedures while major medical covers the very long-term and high-cost injuries and illnesses.
The choice as to what type of health insurance is best depends on one’s options, ability to pay and the level of choice desired. Anyone about to purchase health insurance needs to consider as many angles as possible.
Wherever one stands on the health care debate, there is no denying that the costs of health care are huge and rising. Being such a major expense, it is critical to understand all the costs involved. By doing so, one can better set to find ways to reduce the burden of the cost of health insurance.
In 2009, the average cost for health insurance for a family of four was $13,375. Even though much of this is paid by employers in large and midsized companies as a benefit to employees, it adds to the cost of hiring workers and is an expense everyone must pay in the end regardless.
Premiums
Premiums are the beast everyone with any kind of insurance must face. It is the money paid to the insurance company in exchange for health and other types of coverage. Those paying these directly rather than having them paid by their employers are particularly aware of the painfully high costs, but the money for expensive medical care has to come from somewhere!
Other health insurance costs
As high as premiums are, they are not the end of the cost of health coverage. With costs rising, almost everyone now must also pay a deductable. This is the portion that those facing medical expenses must pay out-of-pocket (at their own expense) before the insurance company will start to pay. While insurance companies are obviously trying to reduce their payments, another principle behind deductibles is to encourage people to avoid unneeded trips to the doctor and reduce the amount of paperwork required to process smaller claims.
Coinsurance and copayment
There are still more costs though. Depending on the plan, it may be necessary to pay a percentage of any expenses, or coinsurance, even after the full amount of the deductible has been paid for the year. Also, many plans, particularly HMOs, charge a set free for certain types of medical expenses: copayments.
Ways to reduce the average cost of health insurance
Fortunately, there are ways to at least lessen the burden of health insurance. Consider the following:
Stay healthy
Staying healthy can reduce the cost of health care in some plans. Also, with fewer sick days and trips to the hospital, a healthy lifestyle will reduce average out-of-pocket expenses while also lowering the number of paydays lost to being sick. From quitting smoking, exercising and eating healthier, there are a lot of things the average person can do to improve their health. If not for one’s family, consider taking steps to live healthier for the pocketbook!
Increase deductibles
For many, especially those who live healthier lifestyles, it may make sense to increase their deductibles and other out-of-pocket limits. While one should do the math beforehand and estimate their likely costs, most can save more in reduced premiums than will be lost to increased deductibles.
Use managed plans
Some people have negative impressions of HMOs and other managed plans, but they often offer quality health care and lower cost. At least give them serious consideration.
Shop around
Those who have other options such as a spouse’s medical plan can often save by shopping around. Be certain to check out all available options for the best possible price.
Health Savings Accounts
Health savings accounts allow the employed to save part of their income pretax to use for medical expenses. While their rules can be confusing and there are penalties for withdrawing the money for other purposes, they offer great tax savings. They certainly should be used by anyone who is going to have out-of-pocket medical expenses.
Whatever becomes of healthcare in the US, the average cost of health insurance is likely to remain high. Therefore, it will always be important to understand the system as much as possible and look for ways to reduce costs.
|
|