The Hidden Costs of 'Affordable' Health Insurance Plans
The Affordable Care Act promises to expand access to health care by providing affordable coverage to millions of Americans. But finding a policy that meets your health care needs and your budget requirements can be daunting.
Now the good news: Shopping for health insurance is about to get easier.
[READ: How to Find the Best Health Insurance Plan for You]
For starters, the new state-based health insurance marketplaces created by the Affordable Care Act provide consumers with a "one-stop shopping experience to easily compare the costs and benefits of plans," says Kevin Lucia, senior research fellow at Georgetown University's Center on Health Insurance Reforms. These marketplaces will offer tax credits and subsidies to people with low and moderate incomes.
[READ: Why Do You Need Health Insurance?]
To ease the shopping experience, insurers must now provide a summary of benefits and coverage along with a standardized glossary of medical terms. "When comparing plans, think about the health care services you use or anticipate using and the financial ramifications of not having access to the services and providers you want," said Lucia.
Among the factors to keep in mind when shopping for an affordable plan:
Consider "cost sharing" expenses
Many consumers focus on premiums, but out-of-pocket expenses (also know as "cost sharing") can turn what at first appears to be an affordable plan into a financial burden. While cost sharing charges vary from plan to plan, the Affordable Care Act caps out-of-pocket costs at $6,350 for individuals and $12,700 for a family in 2014. (Out-of-pocket maximums for some employer-based health insurance plans won't start until 2015.)
Determining your potential out-of-pocket expenses can be tricky because "the language of cost sharing - deductible, copayment, coinsurance - can be confusing," said Susan Pisano, spokesperson for America's Health Insurance Plans. "But taking the time to calculate these costs is worthwhile."
The deductible is the sum you must pay up front for health care services before your policy's coverage kicks in. For example, a $1,000 deductible means you'll need to spend $1,000 before the plan starts paying for covered services. You are entitled to preventive care -- such as annual checkups, immunizations, mammograms, colonoscopy and blood pressure screenings - at no additional cost whether or not you have met the deductible .
Ellen Pryga, director of policy at the American Hospital Association, advises consumers to consider their money management style when deciding between a plan that has a low premium (but high deductible) or a slightly higher premium (but lower deductible). "Some people have no trouble establishing a savings account to cover the deductible. For other people, savings is more difficult. They may be better off paying the slightly higher premium so they aren't tempted to touch that savings account for other reasons."
The copayment is the flat fee ($20, for example) you pay each time you access care, such as visiting the doctor. "Those little things can add up depending on how you use services," said Pisano. For instance, copayments can multiply quickly if you take several medications prescribed by various specialists who all require a visit to the doctor's office to renew a prescription.
Coinsurance refers to the percentage of the cost of a covered health care service that you must pay. Let's say your plan comes with a 20 percent coinsurance. An office visit that costs $100 leaves you with a 20 percent coinsurance payment of $20. These costs can add up quickly, too, when you consider that 20 percent of an emergency department visit or a lengthy hospital stay can lead to thousands of dollars in coinsurance payments . For example, the average cost for non-complicated pregnancy and newborn care can total more than $32,000.
Look beyond the cost of premiums
Avoid the temptation to automatically select the policy with the lowest premium because you may pay more for your health care in the long run. Premiums refer to the annual cost of an insurance plan (usually paid in monthly installments), regardless of whether you access health care services. Plans with low premiums usually have high out-of-pocket expenses to cover deductibles, copayments and coinsurance, so you may be saddled with bills you weren't expecting.
People under age 30 and some people with limited incomes can purchase catastrophic health plans that cover worst case scenarios. While these plans generally have lower premiums than comprehensive plans, they come with high deductibles and out-of-pocket costs so you'll need to be prepared to handle these expenses. These plans will cover certain preventive measures with no out-of-pocket costs to consumers.
Get the coverage you need
Make sure the plan covers the medical care you need, especially if you have a chronic illness (like diabetes, asthma, multiple sclerosis, arthritis) that requires ongoing care. "If you buy coverage just because it's cheap and it doesn't offer the services you need, then you have thrown your premium dollars down the drain," said Pryga.
The same holds true for prescription drugs. Insures must cover at least one drug in every category and class of medications. But your particular medication might not be on the list, leaving you with higher out-of-pocket expenses. "Look at the cost of your medications across various plans to determine which are reimbursed at a higher rate," said Cheryl Fish-Parcham, deputy director of health policy for Families USA.
Carefully examine the provider network
Find out if the plan's network of doctors and hospitals include your primary care physicians and specialists or you might get stuck with the bill. Going outside your plan's network of providers can lead to a hidden cost known as "balanced billing," said Lucia. "Non-network providers will bill for charges that exceed the amount that your plan reimburses for a covered service." Some plans also require a referral to see a specialist and insurer authorization before undergoing an expensive procedure.
Read the fine print
The Affordable Care Act sets a minimum standard of care, known as essential health benefits, for 10 categories. But insurers have leeway in the type and number of services offered in each category. For example, insurers must cover mental health services, but plans will vary on the number of therapy visits allowed per year. "There are going to be scads of exclusions in policies, even with the essential health benefits," said Pryga.
You are not alone
If you're still feeling overwhelmed about shopping for health insurance, take heart. Help is available online at HealthCare.gov (or CuidadoDeSalud.gov for Spanish-speaking consumers), by phone at 800-318-2596 round-the-clock, and in person.
"The Affordable Care Act sets up a system of 'navigators' who will be available on a one-to-one basis to educate consumers about their health insurance options and walk them through the enrollment process," said Vicki Breitbart, director of the Health Advocacy Program at Sarah Lawrence College. "You don't have to venture into the morass alone."
More Information:
Should You Take the "Obamacare" Tax Penalty?
Myths and Facts: How the ACA Affects Medicare
