How to Really Understand What You’re Buying on a Healthcare Exchange

I’m convinced that the luckiest people in America are those who have decent employer-sponsored health insurance, but only one, so there’s not much to choose from. For the rest of us, each November open enrollment period begins anew the painful process of choosing the least worst plan offered by your employer. But the biggest pain comes to those of us who have to make purchases on the national Healthcare.gov website or on the government exchange.

I’ve been getting health insurance this way for almost 10 years now, and while I’ve gotten better at navigating the process, the process itself hasn’t gotten any better. Since a shocking amount of each paycheck will go toward whatever I choose, it’s important that I make the smart decision that will save me the most money on healthcare over the course of the year without sacrificing the coverage I need. Here’s everything I learned to make this decision easier, and it may also help you figure out how to navigate it.

Health Insurance Terms You Should Know Before Buying an Exchange

To get on the right foot, it’s helpful to know some basic terms that you’ll see over and over again in medical documents:

• Health insurance is a plan that you agree to purchase annually, for which you (and in some cases your employer and the government) will pay a monthly payment called a premium . The point of these plans is to try to keep you from going bankrupt for medical care you may need during the year, and it is most useful in an emergency, although it may also cover some preventative services at little or no additional cost. (see below).

• You can only choose these plans during open enrollment, a time period at the end of the year with strict deadlines when you have to make a purchasing decision. Changing coverage outside of open enrollment usually requires a major life change, such as marriage, divorce, birth of a child, job change, relocation, or loss of previous coverage.

• By law, almost all plans are required to pay for basic health care you receive during the year, such as preventive visits (for example, an annual checkup when you are not sick, rather than a visit for illness).

• The amount that an insurance company will pay a provider (a term that includes doctors, nurses, hospitals and laboratories, virtually any place or person providing medical care) is called the benefit . Every time you get medical care and use your insurance, your insurance will provide an explanation of benefits (EOB), which looks like a bill but is not a bill, explaining how much they will cover and how much you may be responsible for.

• Insurance companies consider your care to be divided into many different categories, starting with your primary care physician (PCP), who will be primarily responsible for coordinating your care, with whom you attend your annual preventive visit, and you may need one visit. before you can see a specialist (this permission to see a specialist is called a referral ), which is any health care provider who has a specialized practice, such as a cardiologist, obstetrician, or rheumatologist.

• Mental health care is considered separate from specialists or your PCP. Any test, such as an x-ray or blood test, is considered a laboratory test , and any medications are considered prescription drugs . Every health plan has a set of rules about the amount of coverage for each of these categories that need to be laid out before you sign up, so when you look at a website that offers you different plan options, you may see them ahead of time.

Given this, you would think that it would be easy to compare apples to apples as to which plan is best for you, right? Unfortunately, there are some additional factors that complicate the calculations.

What is the difference between a copay and a deductible?

Health insurance is great for offering you many different terms regarding what it will pay for and under what conditions. All plans start with a deductible —the amount of money the insurance company expects you to pay out of pocket before they do anything. However, the law requires almost all plans to cover routine preventive care without using your deductible.

Once you reach your deductible, which is typically thousands of dollars, your insurance should begin to cover the costs. At this point, your contribution will be covered by a coinsurance term, which is usually expressed as a percentage. Your insurance may cover 80%, leaving you responsible for 20% of the costs at this point, as determined by the coinsurance provisions of your insurance plan.

All plans also have a number called an out-of-pocket maximum , which can sometimes be the same as your deductible, but is usually higher. This is the maximum amount you will pay out of pocket in a calendar year. Once you reach this number, insurance usually covers all of your medical expenses and coinsurance is no longer required. Out-of-pocket maximums are usually quite high and are intended only to ensure that you don’t go bankrupt, not to ensure that health care is actually affordable. If you go to the emergency room, need surgery, or are hospitalized or receive a lot of medical care throughout the year, you will likely reach your out-of-pocket maximum.

Some insurance plans offer what is called a copayment . For specific services, such as gynecological care, medications, therapy visits, or doctor’s visits, your insurance may cover some of the costs before your deductible is met, and all you’ll pay is a small copay. Not all plans offer this, so it’s important to take a look at the benefit chart and see if yours does. Plans that offer a copay may have higher deductibles, but if you’re unlikely to meet it, paying a copay may make sense.

All these expenses that exceed your insurance premiums can be quite daunting, especially if you don’t think you’ll be able to meet your deductible in a year. And all of these aspects of how you’ll pay for your care: premiums, copays, coinsurance, deductibles, and out-of-pocket maximums make it difficult to know exactly how much money you’ll pay for health care under each plan, as well as to compare one plan to another. with another.

HMO vs PPO vs EPO vs HSA

When you dig into the plans, you’ll see that plans often include the terms HMO, PPO, EPO, and HSA. These refer to the type of supplier network you will have access to, and this can be important for several reasons. First, you may have providers that you already have a relationship with that you don’t want to change, such as an internist, family doctor, or gynecologist, so you’ll want to make sure your provider is part of that network. Second, your health insurance only covers providers and services covered by the plan except in emergencies, so if you travel a lot or have special circumstances, you need to be sure you can access the providers you need or you’ll be stuck with a bill that you may have to pay out of pocket.

• A preferred provider organization ( PPO ) is supposed to offer the most flexibility, meaning it should offer more options for who you can see for your health care and allow you to make appointments with specialists without a referral from your primary care physician. .

• A health maintenance organization ( HMO ) is supposed to be cheaper because it will better manage your care. Most HMOs require you to see your PCP before seeing any specialist, and the provider network is often smaller.

• Another option now exists is an exclusive provider organization ( EPO ), which is a cross between an HMO and a PPO. You don’t need referrals and you get access to a wider network of providers, but you’ll have a higher deductible to compensate for that access.

• Finally, there are Health Savings Accounts ( HSAs ), which are savings accounts that set aside money from your paycheck that you will use specifically for health care expenses. Once the money goes into an HSA, it can’t be used for anything else, but the money rolls over from year to year and you don’t lose it. The reason people use an HSA is because the money is put aside pre-tax and you don’t pay taxes on it, and all the while, because it’s a savings account, it accrues interest. Plans that offer HSAs typically have higher deductibles but lower premiums.

How to make sure the care you need is covered by the plan

The hard lesson that many people face is that some plans come with more limitations and exclusions than others. Health plans offered by religious institutions may not provide, for example, gender-affirming care or certain types of health care for people who may become pregnant.

There are also health care networks that are so restrictive that you can’t go to the grocery store and get a vaccine, but can only get them at vaccination sites offered by the network. The same goes for prescriptions that you can only get at a specific pharmacy or by mail. It may not seem like a big deal, but less flexibility means less options.

While almost everyone has a complaint or two about their health insurance, one way to get basic advice on these issues is to ask in your local community (health insurance is regional) or even ask a question on the Reddit forum for your city or area.

If you’re looking into health plans offered by your employer, you should have a benefits coordinator in your HR department who can answer questions, and your co-workers may be able to provide feedback on how flexible the plans were for them.

How to Choose Between Health Plans (And Find Out How Much You’ll Actually Pay)

Although most marketplaces, whether through the government, your job, or a national exchange, make it difficult to compare the most important metric: what you’ll actually end up paying out of pocket between premiums, copays, coinsurance and deductibles. You can do this yourself, but you’ll have to do a little math to figure it out.

Make a table of last year’s health care costs, line by line for each category:

• Monthly premium x 12 months

• Total number of primary care visits per year

• Your total number of specialist visits per year

• Total cost of your laboratories

• Total cost of your prescriptions

• The total number of visits you made to a psychiatrist in a year

You can add rows for additional categories not described here, such as hospital visits or procedures. Create a new column for each plan you are considering. Now calculate what your out-of-pocket expenses will be under this plan. For example, it will make a big difference if a plan doesn’t cover mental health visits until you reach your deductible compared to a plan that offers a flat copayment. For example, if you see a therapist twice a month, that’s 24 visits a year. This could cost you $6,000 out of pocket if your plan doesn’t offer copays before your deductible is met, or $600 if they do. The same applies to prescriptions and labs.

The totals at the bottom of the table will show you how much you’ll pay out of pocket over the course of a year for each plan and give you a realistic way to compare. Although your health care needs change from year to year, comparing with last year’s costs will give you a real chance to compare plans with each other and may be the most accurate predictor of your actual costs for the next year.

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