And you thought Hansel and Gretel had it bad?
In the days of yore, when you discovered you had a bump on your butt, you simply made an appointment with your doctor, had it treated, received a Band-Aid and went home with the bill.
It was essentially a simple and straightforward pathway from beginning to end.
Now, healthcare and health insurance is a Grimm-like nightmare and certainly no fairytale.
Coming to terms with health insurance terms is like foraging in a foreign language forest.
Just Out of a Deep Sleep? What Is Health Insurance?
In case you have just come out of a coma, Snow White, the days of going to the witch for a fruit consult are over.
Now we cover our bets that we won't get sick or injured by purchasing policies that take the sting out of the cost of losing that bet.
Health insurance policies cover medical expenses for injuries, illnesses and chronic health conditions---even the bump on your butt.
You may be offered a policy through your employer, or you select self-pay one.
Healthy as a Horse: I Don't Need Health Insurance
Ah, the folly of youth. There is a period in everyone's life when we are 10' tall and bulletproof.
For most of us, we become so preoccupied with earning money that we fail to prioritize our healthcare. Here are a few reasons why you should have healthcare coverage:
Remember when you wanted to be a weekend Decathlete?
You sure can't remember how many strangers you "swapped spit" with at that bar last night. Eww...
Make a Plan, Stan
How do you know when you've finally made it to adulthood? When you have to decide on a plan to cover your medical expenses, including that fall you took off a barstool when you drank too much at a stag party.
That is correct; there is no such thing as one policy covers all. That's because not everyone is formed from the same cookie-cutter, works for the same slave-driving employer or has the same sized wallet.
Package or Personal? Individual vs. Employer
Those who work for a living may be offered health insurance as part of their compensation package. That doesn't mean that all employers offer health insurance, but if your employer does consider yourself very lucky.
Employer-sponsored coverage is the most common way Americans get health insurance. It includes employees, their families, and retirees.
When you see the terms 'employer-sponsored' or 'group coverage,' what they mean is subsidized health insurance. Employers that offer group insurance can subsidize or pay a portion of the premiums (the monthly fee) and receive tax benefits for doing so.
If you can get employer-sponsored (a.k.a. group coverage), then take it. Having someone else pay a portion of your costs is free money.
Okay, but here's what sucks:
Just Me & Thee
Individual healthcare coverage means you reach into your ragged, near-empty pockets and pay for healthcare coverage for yourself and your family.
The good thing is you get to fo the following:
Okay, but here's what sucks:
Types of Health Insurance Plans
Health insurance plans vary according to how the different gangs of healthcare providers are grouped, called a network. A healthcare provider is anyone that exchanges healthcare-related services for a fee. This includes hospitals, labs, pharmacies, physicians and so on.
PPOs, HMOs, and So-and-Sos
Oh, for goodness sake!
With all the acronyms used to describe health insurance plans, it's enough to make you feel like you're back in kindergarten trying to say the naughtiest word your little brain can formulate.
There are plans that have acronyms for names, plans that have precious metals for names, plans for the amount of money that gets siphoned out of your pocket before you get a true return on the money you have paid in, and plans by length of activation. If all this makes you need to go potty, we'll wait until you get back.
PPO: Preferred Provider Organization Plans
This plan allows you to have more options than other plans, but you still have to choose healthcare providers that are in the same network (gang). If you do obtain healthcare outside of that network, you still may be covered, but most likely you'll pay a higher price. You won't have to select one single physician called a Primary Care Provider or PCP to act as a gatekeeper and permission-giver for you to see a specialist, for example. You'll pay a higher monthly fee called a premium, as well as a higher deductible--the amount of money you have to fork over upfront before an insurance company will meet their obligations--- than you will with other plans.
HMO: Health Maintenance Organization Plans
This plan has more restrictions than a PPO. Care usually is covered only if you see a network provider and you will deal with restrictions that limit coverage. First of all, you will be forced to choose a gatekeeper, a primary care physician (PCP). Next, get ready to have limitations put on things like the number of doctor visits, lab tests, and treatments. This means that the insurance company is going to offer less service and pay less for what they do offer. The biggest trade-off is cost.
EPO: Exclusive Provider Organization Plans
Oh no, the exclusivity is not in your favor. You will not be a member of a country club or get the best table at a five-star restaurant. An EPO, similar to an HMO, requires you to use the healthcare providers that are in the network exclusively, except in an emergency. Unlike a PPO, however, you don't need a PCP to give you the 'okay' to see a specialist. This permission-granting by your PCP is called a referral.
POS: Point-of-Service Plans
A Point-of-Service plan is a blending of HMO characteristics with PPO characteristics. Sometimes you're allowed to get care from a provider outside the network. Some POS plans require you to have a PCP. Some of you might rather just have a frozen margarita than a blend of services.
The So-and-Sos: Indemnity Plans and HSAs
Oh good grief, Gilda! Are all these health insurance terms making you feel like you need two Tylenol, two Valium, two vodkas and a nap? Don't despair; just keep reading…
An indemnity plan is a non-managed policy that does not have provider networks. You simply are reimbursed a portion of your charges for services they cover. These have fallen out of favor for medical healthcare, but some dental indemnity plans are still common.
HA! Fooled you! An HSA is not a healthcare plan at all. HSA stands for Health Savings Account, and any of the above acronyms can qualify for HSA status, but they have to meet certain requirements laid out by the IRS (Internal Revenue Service).
Short Term Health Insurance
If you need coverage for a short period, such as the gap between retirement and Medicare, a Short Term policy may be right for you.
Six Points to Ponder:
Before plans can be compared, six healthcare terms need to be defined. Yes, we hated vocabulary class in school, too.
Primary care physician. If it is your usual and customary family doctor, great. If you don't have one and need one, then you will have to choose one. They are the gatekeepers and permission givers for other services.
Your PCP is required to write in your medical record that they believe you need to see a specialist for other health care services, such as surgery. If you don't get a referral before you see a specialist, you will be paying through the nose.
Depending on which plan you choose, you will be required to get permission from your health plan before you receive certain healthcare services or drugs. No pre-authorization = no permission. No permission = no payment for services = you pay the entire bill yourself.
This is that gang of healthcare service providers that we talked about earlier. If you use members of the gang, you will pay one price. If you go to a different gang for healthcare services, you will either pay more or pay for all the care you receive from the new gang.
Cost-sharing is just what it says: your insurance company pays a portion, and you pay a portion. Examples of cost sharing are deductibles, copayments, and coinsurance — more on those in just a bit.
With some plans, the provider does the paperwork and submits it to your insurance company. This is known as filing a claim. Some plans require that you fill out the claim forms if you go out of network.
Apples and Apples: Comparing Plans
Are you ready? Let's compare:
Paying for Precious Metals
Healthcare insurance costs money. A lot of money. Before we can talk about the different healthcare-glitzy-gaudy-bling bling, we need to have another one of those healthcare term vocabulary lessons.
C Is for COST:
Cost-sharing: This is a delusional term to mean your portion of the bill. You're actually not sharing anything, but rather are participating in the insurance companies' measures to keep their costs down. Cost-sharing includes coinsurance, copayments, and deductibles.
Coinsurance: Coinsurance is a certain amount you must pay for covered services, not including your deductible.
Copayments: A copayment is the amount you pay to the healthcare provider at the time of service. Not all plans have a co-pay.
Deductible: This is the amount you pay for healthcare services before your health insurance company kicks in any money. Once you meet your deductible, your insurance company will cover the rest of the costs, less your percentage, until you reach out-of-pocket maximum---depending on the plan. More on deductibles later.
Out-of-pocket cost: This is the maximum amount within one year you must fork over before the insurance company pays for 100 percent of services thereafter.
Premium: This is the monthly payment you make to keep your coverage. If you do not pay your premiums, you will be dropped from the policy.
Subsidy: Subsidies are financial assistance from the federal government to help you pay for health coverage. There are two types available through the government Marketplace healthcare shopping mall: premium tax credits and cost-sharing subsidies.
The Metal Tier Plans: Platinum, Gold, Silver, Bronze
Are you needing those two vodkas yet? Since you decided you should have health insurance, just keep wading through the healthcare terms---not the vodka.
The metal tier designation is simply another way to classify health insurance plans. The Affordable Care Act---the Obama Care thing--- is responsible for creating these tiers so that busy people like you might be able to get a better grip on what it is they are buying.
The Platinum plan will cover about 90 percent of your medical costs, and you will pay 10 percent. This is after the premium, the deductible, and the copayments. Remember, they will pay 100 percent after you fork over the maximum out-of-pocket amount.
The Gold plan covers about 80 percent of your medical costs, and you will pay 20 percent. This is after the premium, the deductible, and the copayments.
The Silver plan pays about 70 percent of your medical costs, and you will pay 30 percent. This is after the premium, deductible and the copayments.
The Bronze plan will cover approximately 60 percent of your medical costs, and you will pay 40 percent. This is after the premium, deductible, and copayments. The bronze plan typically offers far fewer options.
Just when you thought you were getting a grip on the precious metals, along comes the Catastrophic Plan to muddle your thinking like a wrench thrown in the works. The Catastrophic Plan is an Affordable Care Act (Obama Care) device that has low monthly premiums and nosebleed-high deductibles. This plan is a way to protect someone from a worst-case scenario, but it is a very restricted option. It's only for people under 30 or people of any age with a hardship or affordability exemption based on the government's criteria.
You'll only see the Catastrophic Plan option on your Marketplace dashboard if you qualify for the option. The premium tax credit cannot be used. In 2019, the deductible for all Catastrophic Plans is $7900.
Suitable in Silver
The SIlver Plans are the most popular. In 2018, 63 percent of shoppers at the healthcare Marketplace chose silver.
We are pretty sure it wasn't group hysteria related to keeping werewolves at bay.
It may be that Silver has been the Goldilocks choice; it has been associated with a large percentage of cost-sharing reductions. That means, savings.
Silver may be just right, but it seems like the present government will be disturbing Goldilocks' slumber.
The Deductible Dance
The deductible is a balancing act. The higher your deductible, the lower your premium. The lower your deductible, the higher your premium. You have to balance your ability to pay an annual deductible with your health condition and current/expected medical expenses.
How to Choose a Healthcare Plan
Choosing a healthcare plan that will work for you is a matter of taking the time to think about what you need NOW, what you might need in the FUTURE, what you can afford and making a comparison. It's like having to take notes while playing a shell game and a game of chess at the same time.
Speaking of Notes
All right, here is where we are going to suggest that you do something probably way out of your usual and customary. Something real nerdy. Something only your grandfather would do. Unless you want to keep referring to a dictionary of healthcare terms, maybe you should either open up the paper copy of last year's insurance policy or figure out a way to insert notes on documents you see on the Internet. Yes, we mean take a pencil, circle the healthcare terms and make a note of what it means in the margin.
Step by Step: The Selection Ceremony
Most people get their health insurance through their employment. If you are one of the lucky ones, then you will not need to use the Marketplace, which is a virtual dating service set up by the government to match those who need to buy insurance coverage with those who have coverage to sell. So, either your employer will get you the paperwork, you will go on the Internet, or you will request by snail mail the information you need to choose a health insurance policy.
The difference between speed dating and choosing a health plan is you will date your health insurance policy for at least one year. Unless, of course, you stop paying alimony (premiums).
Start by determining what your current needs are in terms of healthcare, especially medication. Medications like insulin and blood pressure medicine are covered by all plans. Not all plans, however, offer the brand name medication you would prefer.
Think about your worst-case scenario and evaluate that possibility in light of your risk-taking behaviors. If you engage in hang gliding or mountain climbing, then the potential for you to break a leg is higher than if the most activity you engage in is Pilates.
Go Back to Kindergarten: Choose the Plan Type
Yes, more of the PeePee, PooPoo, Homo thing. Decide how much crap you can put up with and pick an HMO, PPO, EPO or POS.
Pick Your Bling Bling
If you are going to do speed dating on the Marketplace insurance website, then you will need to choose from the Platinum, Gold, Silver, Bronze and Catastrophic plan options. Hopefully, you will find the accouterment to go with that sexy little black number you bought off the rack at the mall.
Joining a Gang: Pick Your Network
If you absolutely must use the physician, hospital or pharmacy that you currently use, then you will need to search for a plan that includes your required healthcare providers. Otherwise, you can shop around to see what networks are available in your area.
By the time you have decided on where you need to go to look for coverage, what kind of needs you have, your possible worse case scenario, what type of plan (remember the PeePee?) you need, what jewelry to wear (the metal tiers) and what gang to join (network), your field of options may be narrowed significantly. Now compare benefits. You don't have to read the whole Bible. All policies offer a summary of benefits. If you have complex or special needs, then you must read the Bible--the detailed documentation--at least until you have all the information that you need.
Juggle the Total Cost of Care
Remember the words COINSURANCE, CO-PAY, DEDUCTIBLE, OUT-OF-POCKET, PREMIUM, TAX CREDIT and SUBSIDY?
Now is the time to compare the total cost of each plan option, insert your bottom-line dollar figure of affordability and come up with a decision. As soon as you have tossed all the balls in the air and have moved them around without dropping them, you will arrive at the plan that works best for you.
A hypothetical Silver Plan has a monthly premium of $800 a month = $9600 a year. Let's say there is an $8000 out-of-pocket-maximum. The same hypothetical Silver Plan has an $8000 deductible per year: $9600 + $8000 = $17,600 worst-case scenario. The out-of-pocket limit does not include monthly premiums. Perhaps you are ready for those two Tylenol?
If your deductible and out-of-pocket maximum are not the same, you will pay 30 percent of your claims after the deductible until you reach the out-of-pocket maximum. After that, the insurance company will pay 100 percent of covered costs until the end of the year.
Okay, we will wait here while you fetch those two Valium.
Most people don't break a leg during the year. If you have pre-existing conditions and need insulin every day, then you can calculate those expected costs. But what about that bump on your butt?
The Federal Government, the master of ceremonies at the speed dating center known as The Marketplace, illustrates a typical scenario perfectly:
For the 2019 plan year: The out-of-pocket limit for a Marketplace plan is $7,900 for an individual plan and $15,800 for a family plan.
Example of out-of-pocket maximum with high medical costs:
Let's say you need surgery with allowable costs of $20,000, and the following figures apply to your health insurance plan:
You pay the first $1,300 of covered medical expenses (your deductible).
Your 20 percent coinsurance on the rest of the costs ($18,700) comes to $3,740.
So your total costs would be $5,040. That's $1,300 (your deductible) plus $3,740 (coinsurance).
But your out-of-pocket maximum is $4,400. Your insurance company pays all covered costs above $4,400--for this surgery and any covered care, you get for the rest of the plan year.
Well, now you look like you want to throw up! You know where the toilet is; after all, you spent a long time hugging the bowl after you fell off that barstool and dragged yourself home from that stag party.
A Sexy Offer or a Witch's Apple?
As you are making your comparison, you have to resist the temptation to only focus on the cost. Yes, that sexy list of benefits looks tasty, but don't end up paying for things that you do not need. And OOOLaLa, those low deductibles or low out-of-pocket costs look enticing, but you end up paying more for less.
If you select a plan that has a deductible that is a thousand dollars less than another plan, but costs $150 a month more in premiums and only offers the same benefits, then your choice just changed from a sexy young thing to a withered old hag who keeps $800 of your money.
You will have to do a little number-crunching before paying for a streetwalker like that. You also are going to have to look into the reputation of the insurance company.
Winding This Party Down
Navigating through healthcare documentation is a necessary evil. You must first realize that having health insurance is in your best interest. Rather than risk your money and your health at the craps table, you will need to formulate at least a resemblance of a plan. You've got this, so go home, sit on your bumpy butt and get to work.
Perhaps you won't have so much work to do if you are eligible for an employer-sponsored healthcare plan and your options are decided for you. If you are like most people out there, though, you will have to do some homework and choose from an individual plan.
Money Money Money
Healthcare costs money—a lot of money—and you want to keep as much of it as possible. You are going to have to consider the cost. Cost includes the monthly premium, the annual deductible, the co-pay, the maximum out-of-pocket costs, tax credits, and subsidies. Healthcare terms will drive you mad, but act like a nerd and take notes; it will keep you from having to return to a dictionary of healthcare terms.
Here and There
The process of decision-making involves determining what your current needs are and what your future needs and high-risk behaviors will be, then pick your plan type and pick your metal tier level. Finally, pick your network and start comparing benefits. Try not to pick your nose.
Juggle the total cost of care and use a worst-case scenario/typical case scenario worksheet. Do not let costs and benefits seduce you into paying for more than what you need or paying for less service. All that juggling just might keep you whipped into shape for next year's enrollment period.
Health Insurance Terms: Success
By using the process we have discussed here, you will get from where you started, past the wicked witch's cottage, through the woods and out to the other side with a healthcare policy in hand. You will run through the jungle and tiptoe through the tulips!
Understanding healthcare terms won't be a simple walk in the park, but by now, it should no longer feel like foraging through a foreign language forest.