“Part IV: Choosing the Right
Health Insurance Plan”
All health insurance companies have health plan benefit summaries and this is your primary source of product specific health insurance information. Not only are the health insurance agents required to provide you with one when you purchase, the contents of the health plan benefit summary is regulated and must be approved by the appropriate regulatory authority in your state. Insist on getting one for each plan you are considering. If the health insurance agent won’t give you one then you should not even consider using that agent or company. They are probably hiding something.
It is also important to note what they don’t say. This is important because if it is a positive point, then the health insurance company wants you to know. Here is an example: Company A states in their health plan benefit summary that the healthcare coverage is 24 hours. Company B says nothing about 24-hour healthcare coverage. If you were a health insurance company and you offered that benefit wouldn’t you want people to know about it. Therefore, you can infer that if it isn’t in the benefit summary, then it’s probably not covered, at the very least you should ask your agent to find out for sure. Make sure you check the section in the back called “Exclusions and Limitations” and by all means, ask questions and expect good answer.
Health insurance agents do not set the premiums, the health insurance company does. The only thing that a health insurance agents can do is add or remove options offered by the health insurance company. State laws insure that health insurance premiums are the same no matter where you purchase. It is best to use an independent health insurance agent as they can tell you about more than one health insurance plan, plus a good agent will provide additional services with no extra costs.
Make sure you know which health insurance plan benefits are optional, how much they cost, and which features are included with the base health insurance premium. Find out if they have annual usage limits, and what they cover. This is important because you will want to justify the additional premium you will pay for the benefit with the potential savings and whether you will even use that benefit.
Be aware of limited benefits…read the benefit summary. Some health insurance companies lower their rates by limiting the health plan benefits to a certain amount, or excluding healthcare coverage for certain things. This minimizes their risk and increases yours. So all of the sudden, the two health insurance plans you thought looked the same are not. One could potentially cost you a lot more than the other when you have to use it.
There are a few areas of the health insurance plan benefit summary that require careful consideration and comparison:
- Exclusions and Limitations – Read this section carefully and take notes, particularly if something you think is important is excluded or limited.
- Prescription drug coverage – Find out if it is subject to the main deductible or if it even has a deductible. Are there co-payment plans available? How do they cover brand name prescriptions versus generic prescriptions? Is there an annual limit on the prescriptions?
- Doctor office visits – What are the co-payments? Is there an annual usage limit? Do they include lab exams? What is the PPO’s contracted rate? What are the preventative care benefits on routine exams, PAP smears, PSA’s, and mammograms?
- Emergency room – Is there a co-payment? Is it waived if admitted? Are your are hospitals part of their network?
- Outpatient treatment – Make sure there are no outpatient limits on the annual amount of the coverage.
- Hospitalization – What are the limits of the coverage?
As you read through the health plan benefit summaries make a list of questions you can ask your health insurance agent.
Now there is nothing wrong with taking on more risk to lower your health insurance premium, as long as you know what the risks are. How much risk you are willing to take directly affects your health insurance premium.
Deductibles and Co-insurance.
The deductible is critical in determining how much you will pay for health insurance every month. The higher your deductible, the lower your health insurance premium.
As a general rule of thumb, the more you expect or want the health insurance company to pay IF something happens, the more you WILL pay each month. The health insurance companies figure if you are willing to pay more, then you are probably going to use it more. So, they factor the expectation of increased usage it into the premiums.
When choosing a health plan deductible you are deciding what portion of your annual medical expenses you are going to be responsible for. Once you meet the deductible then the health insurance starts paying. You should pick the highest deductible you can comfortably live with. In doing so you will see a considerable difference in the health insurance premiums you pay. A higher deductible could save you as much as a thousand dollars or more per year in health insurance premiums. The objective is to find a balance between risk and premium. Look at the additional cost per year for a lower deductible versus the additional risk you are taking on. The best value is typically found with deductibles of $1,000 to $2,500 per person per year. Health insurance companies have also introduced deductibles as high as $10,000.
Once you have met your deductible then you are only responsible for your portion of the co-insurance. There are two parts to the co-insurance, the percentage (i.e. 80/20) and the “stop-loss” (i.e. $10,000). 80/20 co-insurance with a stop-loss of $10,000 means that once you meet your deductible you will pay up to 20% of the next $10,000 for covered services, after which they pay 100% to the policy maximum for that calendar year. Your deductible and co-insurance “reset” every year. Both the co-insurance percentage and stop-loss amount will vary between health plans and health insurance companies. Common co-insurance percentages are 50/50, 70/30, 80/20, and 100/0. Stop-losses typically range from $2,500 to $30,000.
Out-of-pocket maximum is the most you are going to have to pay for covered services in a year. You must find out what this is before you buy! This is where you will be able to separate the good health plans from the “not so good” plans. This amount is calculated by adding your deductible to your co-insurance. This risk is well defined. Health plans that have limited benefits or exclusions for things like doctor visits, prescriptions, emergency room, outpatient surgery, or hospitalization leave you exposed to undefined risk. Once the policy reaches its maximum stated benefit, you pay 100% of the amount that exceeds the benefit limit. Be sure to distinguish between lifetime limits and annual limits.
The next step is actually choosing a health insurance plan. Remember those quotes you got in the beginning now you will be able to use them. First go through your health insurance quotes and identify the plans that have the most attractive premiums. Many online health insurance quoting systems can create side-by-side comparisons of up to 4 different health plans. This makes things a lot easier. The comparison tables will help you compare the benefits of several different health insurance plans quickly and easily. Now you are ready to talk with an independent health insurance agent to help you choose the best health insurance plan for you and your family. If you have followed the various steps in this guide then you probably know more about health insurance and the different health insurance plans available than most of the health insurance agents out there. Now you won’t have to worry about an unscrupulous agent pulling a fast one on you by selling you a sub-standard plan. Part V – Choosing a health insurance agent, will help you find a good agent to take you the rest of the way.