Health Insurance Literacy Part I
Although there was some thought to turning this into the fourth post of our “General, Specialized, and Preventative Care” series, it felt a bit more appropriate to create a new, dedicated series for this topic. As we alluded to in that aforementioned series, health insurance in the United States is an incredibly complex and, oftentimes, a very convoluted topic. There are many different insurance providers to choose from, such as Blue Cross Blue Shield, Cigna, United Health, and more “demographically specialized” insurances, like TRICARE (for the Armed Forces), and Medicaid/Medicare (for the disabled, those under a certain income cap, and/or the elderly). Ostensibly, there are many options to choose from, but oftentimes there isn’t much choice- many individuals must go with the provider their employer contracts with, or their financial constraints mean they must go with whatever they can feasibly afford. With a few caveats, however, the vast majority of plans will have a few common denominators.
As far as financial responsibility, most plans have a combination of the following: Copay, Coinsurance, single and/or family Deductible, and a single and/or family Out of Pocket Max (OOP). Though there are more complexities, understanding these basic terms will enable you to get a better understanding of your financial obligations when seeing your various healthcare providers. A copay is a set fee; for example, a physical therapist visit may have a $150 charge for the initial evaluation, and $75 for follow-up appts. The same physical therapist may cost different amounts for different insurance plans, even if the treatment is the same. A coinsurance is a percentage of the total fee that you owe. For example, Medicare part B (with exceptions) for seniors covers 80% of outpatient healthcare expenses, meaning the coinsurance fee you’re liable for is 20%. Again, there are many caveats to these statements, but that’s a general overview. Deductible vs OOP can be a bit tricky; high deductible plans have become very common, meaning the individual must generally cover the entire deductible amount before their insurance partially or fully compensates them for treatment with in-net providers. In a high deductible plan, (for the sake of simplicity, assume it’s single individual coverage) you may have a deductible to meet anywhere from, say, $2000 to $8000. Treatment will either not be covered at all, or minimally covered until that deductible is met in full. Once it’s met, you’ll have more wallet-friendly copays or coinsurance fees.
Out of Pocket Max is generally the amount you must spend before your insurance covers 100% of your in-network provider. OOP max is greater-than-or-equal to your deductible (but almost always greater). For the sake of example, if your deductible is $4000, it’s likely your OOP max will be $8000 or so. Once the OOP is met through a combination of meeting your deductible and paying copay/coins. fees, your in-network providers will be covered at 100%.
As an obligatory disclaimer, it’s vital to note that the complexity of insurance means there are a myriad of exceptions to some of the statements made here, but this is a valid, if general overview, nonetheless- and a great starting point for your own research, if you choose to do so.