Whether you like it or not, if you live in the United States, you live under the strictest regulatory purview in the world. In most walks of life, you are presented with options, of which you have to choose one. Health insurance is no exception. You can’t just select any health insurance policy. The due process must be followed.
What is the due process?
That I will discuss here.
The Affordable Care Act
To begin with, choosing health insurance is not optional in the US. It was optional before 2010. But post 2010, the Affordable Care Act (ACA) aka Obamacare made it mandatory by penalizing those that are uninsured. The tax penalty part of Obamacare irked people from the lower economic strata.
To compensate, Obamacare added a list of essential health benefits to every new plan. A short waiting period, guaranteed coverage and premium tax credits are few other benefits. Overall, health insurance plans have been made more affordable for economically disadvantaged people.
Understand different plans
The ACA has separated health insurance plans into five different categories. These categories are bronze, silver, gold, and platinum, and catastrophic. The bronze plan covers 60% (lowest) and the platinum plan covers 90% (highest) of annual medical costs. Choosing a plan is not easy. It takes time and requires strategy.
When it comes to selecting a health insurance plan, there are two things to consider. First, which one of the “metallic” level plans to select and second, how to find the right seller. Health insurance is basically a marketplace, so selecting the right seller is very important.
Understand the technical factors
Before choosing a plan, you need to understand the following things.
- Out-of-pocket limit
I am not discussing premium here because it’s too basic. A deductible is a fixed amount, fully payable by the buyer. Once the buyer pays the deductible, insurance coverage starts. Deductible and coinsurance are closely connected. Most plans require customers to pay a certain percentage of the total cost. It’s called coinsurance. Copayment is separate from deductible, but akin to deductible, it’s a fixed amount. Copayment is paying a la carte for healthcare services.
Out-of-pocket limit is basically the cumulative amount of all the out of pocket costs. Every plan has a floor that acts as the limit for how much the buyer must pay out of pocket. Once the limit is crossed, the insurance policy covers 100% of the medical cost.
Under the plan types
Plan types are different from the metallic categories we have just discussed. Plan types decide how much medical care a policy allows you to enjoy. There are four main plan types. The types are health maintenance organization (HMO), preferred provider organization (PPO), point of service (POS) and exclusive provider organization (EPO).
The HMO plan allows you to navigate the healthcare industry with ease. Under the plan, a primary care physician runs the initial diagnosis and then refers you to a specialist doctor. The requirements of an HMO plan are a bit stringent, so find out whether you are eligible or not. PPO plans are more flexible. If you have a PPO plan, you can visit a specialist directly without any referral.
EPO plans are structurally similar to HMO plans. The difference is that EPO networks are considerably large compared to HMO networks. On the flipside, EPO plans come with high premiums. Wealthy people normally go for EPO plans. POS plans require customers to get referrals for specialists but it offers out-of-network coverage.
What to ask
Before going to a health insurance provider, you must create a checklist of things to ask. The first thing to ask is the total cost of healthcare. The seller might try to convince you by offering a very low coinsurance percentage. However, if the total cost covered is also low – under $1000 – the policy is useless.
Next, you ask them about the advanced premium tax credits. It’s important as it reduces the amount of monthly premium. To qualify for the credits, your household income must be under a threshold, decided by the federal government. Individual policies, however can have separate requirements. It’s wise to ask the insurance company to state everything clearly.
Getting all the facts right is essential to choosing the right plan. Gold and platinum plans normally come with high premium rate, which is why people often shy away from them. But I have seen that after tax credits and federal subsidies, the cost of the premiums often comes down.
As you can figure out from this article, health insurance is a complicated area. It’s become even more complicated after the introduction of the ACA and post-2016 when the cost of noncompliance was increased. My advice would be, get a proper understanding of how health insurance works and then invest your money in it. This article serves you as your guide.