Getting sick or injured can be costly in America and that was the original reason the American Health Insurance System was created. The Insurance System is complex and often confusing, with various types of plans, deductibles, copayments and coinsurances. While having insurance can help mitigate the financial burden of healthcare expenses, navigating the system can be challenging. In this article, we will show you what you need to know about how your Health Insurance works.
Health Insurance basically covers part of the medical and surgical expenses incurred by the insured person. These covered expenses are usually paid directly to the health care provider once the deductible has been met. However, depending on the policy and type of plan, there are several factors that can affect the coverage and how much you end up paying.
How do I get Health Insurance
There are several ways a person can access a Health Insurance plan. The most common ways to access an insurance plan are:
As a group by joining an organization that offers insurance (work, college, association, union, church)
As an individual, buying directly from the Insurance company or marketplace
As a family member by addition to a group or individual plan, usually paying a higher premium
How much does a Health Plan cost?
Well, that depends on different factors. First you have to pay a monthly fee to keep your insurance, this fee is called premium. The price of the premium will depend on the type of plan, your age, where you live, if you use tobacco, and the number of family-members you want to add. In case you access your Insurance plan through work, the expenses might be shared with your employer.
However, besides the premium, the costs of healthcare are shared between you and the Insurance. In addition to premiums, you usually must meet a deductible and pay copayments and coinsurance.
Deductibles, copayments, coinsurance and out-of-pocket maximums
Let’s think of the Insurance healthcare system as a three-story building. The first floor is what you have to pay; the second floor is what you share with your insurance; and the third floor is what the insurance has to pay for.
The first floor -what you have to pay- is as high as the deductible. The deductible is the amount you must pay before insurance starts covering medical expenses. For instance, with a $4,000 deductible, you have to pay out-of-pocket until you reach that amount, after which the insurance will pay. If you have a $7,000 bill, insurance will then “help” cover the remaining $3,000 after you pay the deductible. Plans with low deductibles often have higher premiums, while high deductible plans have lower premiums, which is a trade-off to consider.
The second floor -what you share- is where copays and coinsurance are. A copay is a set amount you must pay for covered healthcare services. For example, if you go to a doctor’s office that charges $250 for a visit, and your insurance has a copay of $50, you have to pay $50 and the insurance pays $200. Typically, copays do not count towards deductibles.
Copays have a neighbor called coinsurance. Coinsurance is the percentage that is shared between you and the Insurance after the deductible is met. Let’s say you have a $7000 hospital bill and your coinsurance is 20-80 (20% on you and 80% on the insurance), then you have to pay the $4000 deductible, and the 20% of the remaining $3000.
On the third floor -what the insurance pays- is the out-of-pocket maximum. It is your plan’s cap on how much you have to personally pay for covered medical expenses in a given year. After you hit that maximum, the insurance covers 100% of the expenses. It’s important to note that if you have full insurance (non-limited), the insurance can not limit on your total medical expenses that they pay.
What types of Plans there are
There are four major types of Healthcare Plans in Texas:
Exclusive provider (EPO) plans.
Preferred provider (PPO) plans.
These plans are known as “managed plans”, as they limit the providers you can access at a discounted rate in the plan’s network.
In these plans, only in-network providers are covered. Which means that you have to pay out-of-pocket for providers outside the plan’s network. Also, you need an in-network primary care physician (PCP) to oversee your health. To access covered specialists, you need the referral of your PCP first (with some exceptions like OB/GYN for women).
You must use providers in the network. If you don’t, you might have to pay the full cost of your care. There are exceptions for emergencies and if you need care that isn’t available in the network. These plans usually don’t require you to have a primary care physician. You also don’t need a referral to go to a specialist.
You can go to any doctor you choose, but your out-of-pocket costs will be lower if you use doctors in the PPO’s network. You don’t have to choose a primary care physician, and you don’t need a referral to go to a specialist.
Like PPO plans, point-of-service plans let you go to any doctor you choose. But your out-of-pocket costs will be lower if you use doctors in the plan’s network. Like HMO plans, you usually must have a primary care physician and get referrals to specialists.
As you can see, navigating the Insurance based system can be difficult since it is filled with barriers that prevent you from getting the healthcare you need. Direct Primary Care (DPC) is improving how Americans access their health and it’s restoring the doctor-patient relationship to its original model like the old days, where the doctor felt like part of the family. In our next post on How the Insurance-Based System works, we will explore the main problems with the Traditional Insurance-Based system for Primary Care and how DPC can solve them.