First Time with Health Insurance? Here’s What You Need to Know
Is next year the first time you’ll have health insurance? Maybe you have your first job that offers healthcare benefits, or maybe you signed up for health insurance using the new health insurance exchanges. You’re new to all the healthcare lingo and are probably a little overwhelmed, right?
Keep reading for a quick, easy-to-follow summary of some of the key things you’ll want to know.
The Pieces that Make Up Your Total Costs
There are a bunch of different “fees” that go into the total amount you pay for your healthcare in a year. All of these costs put together equal your total medical cost = cost of the premium + deductible + copays + coinsurance. You’ll pay a premium whether or not you ever receive care. You’ll start paying copayments, deductibles, and coinsurance when you start receiving care.
Premiums: This is the amount you pay to have health insurance coverage. You’ll pay this each month or out of each paycheck if you get insurance through your employer.
Deductible: Just like car insurance, you have to pay this before your insurance kicks in. If you have a $2000 deductible, that means you pay for the first $2000 of your healthcare. Once you’ve paid that, your insurance plan will start kicking in and paying their portion.
Copayments (Copays): When you go to the doctor’s office or get a prescription, you pay a small amount of money up front– usually $20-$50. This is your copay. Some plans, especially CDHP plans don’t have copays, and many plans don’t have copays for preventive care visits. Make sure you know your copays and have it ready when you go to the doctor.
Coinsurance: This one often confuses people – once you’ve met your deductible (paid the whole amount), we said your insurance will start kicking in and paying for your costs. They’ll usually kick in a percentage and split the rest with you. For example, if you have 80/20 coinsurance, that means your health insurance pays 80% and you pay 20%. If you had a $1,000 bill, you would pay $200 and your insurance would pay $800.
Types of Health Insurance Plans
There are several different types of health insurance plans. Each type has different aspects that you’ll want to know about. Here are a few types of plans you’ll see most often:
PPO (Preferred provider organization): PPO plans usually have a higher premium than an HMO, but you get more flexibility and options. You can choose to receive care from any doctor or hospital in your network.
HMO (Health maintenance organizations): HMOs are typically compared to PPOs because they offer similar coverage. An HMO, just like a PPO, has a network of doctors, hospitals, specialists, etc. that you can see for your healthcare. You generally don’t have an out-of-network benefit, and you do need a referral for a specialist. The premiums for an HMO are usually lower than a PPO’s premiums because your network of providers is usually smaller – meaning you have fewer options.
CDHP (Consumer directed healthcare plan): A consumer directed healthcare plan has a high deductible and a lower premium. CDHPs usually work in connection with a HSA (health savings account) that is either funded by the employer or employee. These plans are ideal for people who are generally healthy.
Which one is right for you? It depends on your situation. Sometimes, your employer may only offer one type of plan. Learn how to make the best use of that plan. If you can choose which plan you want, here’s a handy comparison chart for you to review.
The Infamous “This is Not a Bill”
You may have heard of an EOB before, otherwise known as the statement that says “This is not a bill.” It’s true, it’s not a bill; it’s actually an Explanation of Benefits.
Anytime you receive care, your insurance company is going to apply your benefits to your bill and give you back an EOB explaining what they paid and what you pay.
Once you get your EOB, put it in a folder. When you get the bill from your doctor, check your bill against your EOB. Make sure your name is correct, that your insurance is listed, and that dates of service match the date you received care. By doing all of these simple checks, you can check against medical billing errors. Shockingly, 50-80% of medical bills have errors!
What Else Do You Want to Know?
Health insurance can definitely be complex, and we want to try to make it easy to understand. We’ve written a lot about health insurance in the past, so be sure to check it out.
Have Questions? Let us know what topics you have questions about! Chime in below in the comments; we’re listening.