- While I am not an insurance broker, I have come to see time and again how a lack of training on our complicated insurance system creates barriers to accessing care in the United States.
- This is the second post in a multi-part series aimed to help you understand how American insurance works so that you can protect your finances and use your insurance benefits to help you access any and all medical treatment, including mental health treatment.
- The first post covered the basics of insurance networks. Today we’ll cover the basics of insurance payments: Premiums and Deductibles.
- Premiums: This is the “subscription” fee for your specific insurance plan for you and / or your family to be members of the plan. This gets paid directly to your insurance company. Premiums are usually paid monthly and can change from year to year.
- If you get your insurance plan through your employer one of the big perks is that employers often contributes to the cost of the premium. You may pay $10 – $500 or more a month, and that still may only be a fraction of that “subscription” fee for your plan.
- Deductible: A deductible is set amount you must pay towards your medical treatments before insurance kicks in and contributes to the cost of treatment moving forward. You pay your deductible to your medical providers. Deductibles reset annually, and the deductible amount can change from year to year.
- For some services the “deductible is waived”, this means your insurance contributes to the cost of the medical service right away. For other services you will have to pay the deductible amount in medical care before your insurance plan contributes to the cost.
- Often, plans with low premiums have high deductibles or other fees. This means you pay less every month as your set fee, but when you need to access care you may be on the hook for more.
- So, you want to pay attention to your premium cost (this is how much you pay a month to have a membership to your plan) AND your deductible amount (this is how much you have to pay before your insurance starts contributing).
- See today’s post for more information about types of deductibles, why insurance premiums can increase if you leave a job and go on COBRA, and for examples about how all of this works.
Generally speaking, premiums are straight forward when you think of them like a subscription fee. The only caveat to that is understanding what happens if you leave a job and want to access your insurance through COBRA.
When you leave a job in the US you are often eligible for COBRA. This means you can keep the same insurance plan for a period of time that you had at your company, but (unless your company agrees to continue contributing to your premium payments) you are responsible for the premium costs. Often premiums go WAY up if your company isn’t chipping in. This is because you were always only paying a fraction of the subscription fee and one of the perks of being an employee was the company’s contribution to the plan.
Deductibles are less straight forward given there are individual, family, in-network and out-of-network deductibles on most plans. First, let’s understand key language: Once you’ve paid for enough of your medical expenses to hit the magic number of your deductible it is considered “satisfied” or “met”.
Individual and family deductibles are aimed to protect a family from having to pay too much in medical expenses in any given year. The deductible is considered satisfied for all members when the family deductible is met, even if individual deductibles aren’t met. I know that’s confusing, there is an example in the comments (#4) that will help.
You may see that your in-network deductible is drastically lower than your out-of-network deductible. This is because your insurance company has a contract with in-network providers that outlines every possible medical service and how much the company will pay for that service. Your insurance company wants you to see these providers because they’ve vetted them, their credentials, and their training; and all parties have agreed in advance what the costs will be. If you see someone in-network you have to pick from the insurance company’s in-network provider list, but (often) it will cost you less. You can decide if its worth it to you for any given provider to see someone out-of-network.
Comments
- I know this may seem unimportant, confusing and /or boring, but understanding how this works empowers you to select plans based on your medical need and can simultaneously help you protect your finances. Plans are usually selected once a year, so bookmark this and come back to it for a refresher when your plan is up for renewal.
- Are you someone that wants the freedom to see whatever provider you choose? Look for a plan with excellent out of network benefits, then you protect your finances and can have freedom in selecting a provider.
- See the first post in this series on in-network vs out-of-network for more information to help you understand american health insurance.
- An example of meeting a $700 deductible: $10 for a prescription, $500 for a lab test, $190 for a medical appointment. That adds up to $700, meaning the deductible would be met. A key point: Not ALL types of medical expenses count towards meeting your deductible, again, this can be plan specific and is a good question for you to ask as you’re deciding what plan you want to be on.
- Family vs individual deductibles explained through an example: Imagine a family of four, two parents, two kids. Each person could have an individual deductible of $700, and the family deductible could be $1400. That means once the family, as a cumulative unit has paid $1400 towards their deductible the deductible is considered met for all family members. Otherwise, it is met for each individual when they hit their individual deductible amount. Meaning if one kid hits $700 and one parent his $700 the deductible would be considered met for all family members, INCLUDING the two individuals that have not spent anything towards their deductible. Even if each member only hits $351 they would still have met the family deductible because they are over that $1400 family number. This is can create an incentive for family members to be on the same plan depending on the size of the family and the size of the deductibles.
- Empower yourself by asking your HR department or insurance provider “what services are waived under the plan’s deductible” (translated into non-insurance speak, this means what services will be covered as though I’ve met the deductible even before i’ve met it). It’s not uncommon for preventive services to be covered including services like therapy!
- If you’re planning to leave a company, ask your HR department about what the full premium costs are so you know what to expect if you’re planning to enroll in your plan through COBRA. You may also be able to negotiate the company continuing to cover a portion of your premium costs depending on the circumstances of your departure.
- Have you ever heard horror stories about a provider or hospital charging someone $3,000 for a bandaid? The reason that can happen is because out of network providers / hospitals are entitled to charge whatever they want. In-network providers are the only providers bound by a contact with the insurance company that limits how much they can charge to the patient.
- Be aware, there are insurance nightmare stories out there about certain labs / facilities / providers not being in-network, and patients not being notified in advance that they will be accessing an OUT of network lab from an otherwise IN network provider or hospital. This is something to discuss with your provider in advance to make sure they use external labs or other providers that accept your plan.
- You may be asking yourself why would I see an in-network provider if I have a high deductible because I will be paying anyway. Good question. The advantage of seeing an in-network provider even if you have a high in-network deductible is that even though you are paying in full, your insurance has capped how much your provider can charge you. If you see an out of network provider the insurance company has no influence over what the provider charges, and it’s often more than the rate an in-network provider will be allowed to charge (see comment above on the $3000 bandaid).
- How do HMOs and PPOs and POS etc fit into this? Essentially HMOs are small “in-network” plans and “PPOs and POS’s” are large “in-network plans”. With most HMOs you have to get a referral from your primary care physician to see anyone else and have insurance cover it, but that too depends on the plan. With PPOs you don’t need a referral but “in-network” and “out of network” still applies.
- What about medicaid and medicare? Same thing applies, some providers and facilities accept medicaid and medicare and others don’t.