As more people are getting a private health insurance plan this year, many for the first time ever, there’s still a lot of confusion about what it all means. Dr. Saggar, the ‘Doctor is In’, is here to help understand a few of the words and phrases you hear being thrown around...
What do you mean by premium?Your premium or rate is what you pay each month for your health coverage. Your rate is based on the plan you select, where you live, your age and tobacco use for yourself and any dependents you may be covering.
What is a copay?
The copay is your share for the upfront cost, as the patient, for getting seen when you go and see a healthcare provider like a doctor or nurse practitioner. It’s usually a flat amount, such as $15 for a primary care visit, $50 to $75 for an urgent care visit, and $200 to $300 for an ER visit.
What’s a deductible?
The deductible is the amount you and your family has to pay before your insurance company actually starts paying for anything. For example, if your deductible is $3,000, that’s what you must pay before the plan will start to pay.
So plans with lower deductibles will have a higher monthly premium, and plans with a higher deductible will have lower monthly premiums.
What is coinsurance?
This word means the share of the health care costs you’re responsible for paying. It’s listed as a percentage. For example, if you choose a plan with 20 percent coinsurance you will pay 20 percent of the cost of care AFTER you’ve reached your deductible.
So what is meant by the ‘out-of-pocket maximum’?
The amount you have to pay each year for health care before it’s covered 100 percent by your plan. This is the most you’ll pay for care during the year. This includes three things: your copays, your deductible and the coinsurance, but not your premiums. In other words, only after you’ve paid (1) your monthly premium and (2) your copay and (3) your deductible and finally (4) your share of the coinsurance - only THEN will your insurance company start paying for your medical care.
Understanding this makes people wonder why they even have insurance to begin with! The answer: it’s important for those catastrophic things that you can never really afford to cut a check for, such as a big heart attack or stroke, getting hit by a truck or getting cancer.
What is a formulary?
A formulary is a list of medicines covered by your health plan. You’ll often pay a lower copay or coinsurance for formulary medicines than non-formulary medicines. This is usually because the insurance company has negotiated lower prices for one drug compared with another, so obviously they want you to choose the drugs that they have to pay less for.
What is my coverage outside of the network?
Most individual plans, but not all, have some kind of out-of-network coverage. This is important if you travel around the country, or if you want more choice. If your insurer has no out-of-network coverage, then you’re as good as uninsured if you go somewhere they don’t want you to go. Plans with no out-of-network coverage are usually the cheapest you can find.
The amount you pay (deductibles and coinsurance) for using out of network providers will be higher than if you receive care in-network. Again, the insurance companies have negotiated lower rates with the network providers, and hence try to steer you towards seeing their ‘favorites’, because it’ll cost them less money.
What is the Direct Care network?
Direct Medical Care, aka DMC, is a capitated model, which a growing number of people are using throughout the country, in an effort to reduce or eliminate their out-of-pocket costs. For a low fixed monthly fee, like $59/month in Saint Louis for example, you can get primary care or urgent care, and never pay a penny for a copay, deductible or coinsurance again, for that particular kind of visit. The good thing is that over 80% of visits are primary care or urgent care, so this really does help cut your costs dramatically.
So, if you get a [much cheaper] catastrophic or bronze insurance plan with a direct medical care plan, then your out-of-pocket expenses are limited to around $700 per year if you can restrict your visits to primary care or urgent care, and things are a lot more predictable.
So why should we get health insurance?
Chiefly because of the serious catastrophic big stuff that could happen.
Our out-pocket-costs far exceed the value we get for them when we use insurance for the ‘small-ticket’ items such as urgent care or most ER visits, but we continue to want to have health insurance as a nation, because we’ve been hypnotized to believe that we are somehow exposed or suffering without it. Prevention of disease for those who are perfectly healthy, in the form of an annual physical with your physician or nurse practitioner, is definitely a good idea, but this can still be done affordably without all the copays, deductibles and so on, associated with health insurance.
In summary, insurance was originally created for big-ticket catastrophic problems, much like car insurance, so we should use it for that. For the small stuff, use a much cheaper option in the form of a Bronze plan plus a monthly plan such as DirectMedicalCareUSA.com