Have you ever looked at insurance benefits and felt like you were reading another language? If so, you’re not alone. Many young Americans feel overwhelmed by shopping for health insurance, which is understandable when you consider that this one decision will affect every single healthcare purchase you make.
Fortunately, once you learn the language, you can distill that insurance-speak down into a few key components that will help you pick the best plan for your unique situation. From there, with a few insider tips and a little bit of legwork, you can get the best possible rate for your medical care.
Buy the Right Healthcare Insurance Plan for You
The first step is choosing the best insurance plan for you. For Millennials in particular, it’s important to buy what you need, not what’s prepackaged. Millennials are particularly sensitive to price, and it’s no wonder. “You’re looking at a generation that has significant student debt, that has wages that have declined more rapidly than for older workers,” according to Jen Mishory, executive director for Young Invincibles, in an interview with CNBC. “Young people are trying to make sure they are getting the best deal possible because they need the best deal possible.”
You should evaluate each insurance plan on these key components. Ask yourself:
- What is my monthly premium? This is what you’ll pay every month, whether or not you use any care. Can you afford this cost each month? This is called paying for preconsumption – you pay before you consume any services.
- Is there a deductible? This is the amount you have to pay out of pocket before your insurance kicks in. If you had a major medical event, could you absorb this cost? How likely are you to spend this amount?
- Is there a copay or coinsurance? Coinsurance is a percentage of your procedure cost that you still have to pay even after your deductible is met. A copay is a flat fee charged with each service. Both will be added on top of the cost of the procedure.
- What is your Out-of-Pocket Maximum? This is the most you will pay out-of-pocket if you do have a major medical event. You’ll pay coinsurance or co-pay until this is reached.
Another important consideration is the provider network. If it’s important for you to go to a particular physician or specialist, you need to make sure they are in-network for the plan you choose. If that doctor is out-of-network, you may have a much higher charge and you may end up with a much greater out-of-pocket responsibility.
The Most Common Plan Designs, Simplified
Looking at insurance plans is a veritable alphabet soup of acronyms, and it can seem confusing. Remember to break down each plan into the key components above, and the comparison becomes much simpler.
- PPO (Preferred Provider Organizations) – PPO plans give you flexibility. You don’t need a primary care physician. You can go to any health care professional you want (including specialists) without a referral—inside or outside of your network. PPOs tend to have higher premiums and lower deductibles. Staying inside your network means smaller copays and full coverage. If you choose to go outside your network, you’ll have higher out-of-pocket costs, and not all services may be covered.
- HMO (Health Maintenance Organizations) – With a HMO, you pick one primary care physician. All your health care services go through that doctor. That means that you need a referral before you can see any other health care professional, except in an emergency. Visits to health care professionals outside of your network typically aren’t covered by your insurance. HMOs tend to have lower premiums and lower deductibles, but also have less flexibility.
- EPO (Exclusive Provider Organizations) – EPO plans combine the flexibility of PPO plans with the cost-savings of HMO plans. You won’t need to choose a primary care physician, and you don’t need referrals to see a specialist. As a member of an EPO, you can use the doctors and hospitals within the EPO network, but cannot go outside the network for care. There are no out-of-network benefits. An EPO typically has higher deductibles and lower premiums.
- HDHP (High-Deductible Health Plan) – As the name suggests, these plans offer lower premiums and higher deductibles. These types of plans may come with a tax-exempt health savings account to help you cover pre-deductible costs. The most common are:
- HSA (Health Savings Account) – You contribute money from your paycheck each month, up to a limit of $3,350 each year. The money is yours, and the account stays with you year after year and even between jobs.
- HRA (Health Reimbursement Account) – Your employer contributes a set amount of money each year into this account. You use this account to reimburse your medical expenses. The account does not travel with you if you leave your employer.
- FSA (Flexible Savings Account) – You can contribute up to $2,550 to this account. However, this money doesn’t carryover between years, so be sure to spend whatever you put in, and the account and the money in it stay with the company if you change jobs.
When you’re looking at an insurance plan, think of what your personal lifestyle requires. If you don’t go to the doctor very often, and you don’t use much of your healthcare, then you may prefer a plan with a higher deductible and lower premiums. If you take a medication regularly or have a chronic health issue, something with a lower deductible may be more affordable for you. Do your homework, compare the plans based on the key components above, and base your decision on how often you use healthcare.
Make your Out-of-Pocket Dollars Go Farther
For every physician, there are probably as many different prices for one procedure as there are insurances they participate in. Comparing premiums is difficult, but savings can be significant. Consumers with HDHPs will feel price differences the most, but even fully insured patients will benefit from comparing prices. After all, would you rather pay a 20% coinsurance on a $500 procedure or a $1000 procedure?
Start with price transparency websites (Healthcare Bluebook, for example) to get an idea of what procedures cost in your area. Then call your insurer and ask for a direct quote for your specific provider. If you don’t have insurance or have an HDHP, call local providers in your market and ask for the cash-pay price. Be sure to ask if that price is bundled (includes all fees) or if each related service is billed individually. Bundled prices help prevent surprise bills later.
Speak Up, Save Money
Being price-conscious is helping Millennials speak up for better savings. “There are generations of us who have come to be frustrated…in our health-care system and feel…powerless. These younger generations are saying they’re just not going to accept that.” Ceci Connolly, director of Price-Waterhouse Cooper’s Health Research Institute, said in a CNBC interview. With a bit of homework, you can keep more of your hard earned money and stay healthy enough to enjoy it.