I’ve had some interesting conversations this past week and wanted to take a step back to discuss health insurance in general. I’m slowly learning that the vocabulary regarding health insurance is very foreign to some folks and they are having difficulty understanding the terms that are used. I want to take this opportunity to educate folks on some of the basics and how it pertains to you, the consumer.
So lets start off with the basics of insurance terminology in its most simple form- in regards to how it plays out in the medical world.
Premium- this is the amount of money you pay to have health insurance (your safety net), can be paid monthly, quarterly, or all at once.
Deductible- this is the amount of money that you must pay before your insurance even begins to cover costs. There are fine details associated with this but in my mind, this is how I think about it. These can vary from a few hundred dollars to $10,000, depending on what kind of insurance that you have.
Co-insurance- after you have paid the entire amount toward your deductible (the amount of money you pay prior to your insurance actually kicking money in), your co- insurance represents the amount of dollars you are still responsible for. Let’s use an example to demonstrate this. If you see a doctor and the bill is $100, the first hurdle is whether you have paid your deductible yet or not. If you have paid the deductible amount, the insurance carrier will pick up a portion of the bill and the rest you will owe. If your Co-Insurance is 20%, then you are responsible for 20% of the bill. In this case its $20. If your Co-Insurance is 35%, then you are responsible for $35. The higher the co-insurance, the more money you will have to kick in for medical services.
Out of Pocket Maximum- this is the amount of money in a given YEAR, that you will likely need to pay on top of health insurance. Some plans include your deductible towards this amount. Some do not. The other fine detail here is that your insurance carrier can deem certain services not included in this out of pocket maximum. For example, if you really hurt your knee and need an MRI, your insurance carrier can say that the MRI is not a covered service meaning that they will not pay for it. The MRI bill will come to you on top of all the other bills that you have accrued.
IN- Network/ OUT of Network- This seems to be the area of most confusion for most patients. The simplest analogy I use is to think of discount membership stores like Costco or Sam’s Club. When you have a membership to either place, the products they sell have been approved by Costco or Sam’s, at an agreed price, and then the you the consumer can purchase it from the store, typically at a discounted rate. If a product that you want is not at Costco or Sam’s, then you are going to pay full price at another store. IN- network means that the doctors office has agreed to terms set by the insurance carrier, and you the patient only pay a pre-determined amount of money based on these negotiations. Most times- your charge is a nominal fee. OUT of network means that your doctors office is NOT a part of the insurance plan. The fees associated with this visit are ultimately your responsibility and sometimes your insurance carrier pays you back for services rendered. NEVER assume that your doctors office is IN NETWORK. I always assume OUT of network coverage until I see it in writing.
Co-Pay- The amount of money that you must pay at the doctors office. Think of this as an entry fee. Primary care doctors have a low copay. Specialty doctors and the Emergency Room have high Copays. The copay is devised as a financial barrier. The insurance company and the medical practice wants to make sure that you the patient are coming in for something truly medical related. You would be surprised at how many people that have $0 co-pays come to the doctor for a hang nail, or non medical related issues. It’s a way of allocating resources as well. For every hang nail, there is also a sick patient that may have not been seen. Some patients have commented to me about copays in the past, thinking that this money goes straight into our pockets as supplementary income. Rest assured, I tell them, the amount of money collected barely covers the electricity bill.
So in essence, the question I hope that many of you are asking yourselves, is what’s the point health insurance? It does not provide any health benefits. There seems just to be layers of payment schemes. So why get health insurance? You need to start thinking of health insurance like car insurance. Most of us get car insurance to help protect us from financial woes if we total our car or get into a serious car accident. It offers a layer of financial protection for us. We still get our oil changed, brakes fixed, tires rotated, get our maintenance done at our own expense. This is how I view health insurance. It’s there to help pay for medical services if you should get really sick or really hurt. It will offset a majority of costs that you may have been responsible for. In the event of a serious accident or surgery like appendicitis, those with high deductible insurance plans will burn through the deductible within hours of such an event. It will offset the bill of $20-30K coming to greet you 30 days later.
The last point I will leave you with came out of a patient conversation this past week. There is a perception out there that doctors receive discounted rates for our own healthcare insurance and coverages. The assumption is based on the fact that since we are in the medical arena, that insurance carriers cut doctors a break. Nothing could be farther from the truth. For years, I paid, through my former group, $6000 per year ($500/month) for my own health insurance, something I rarely used. I was not given a higher level of coverage than any of my staff. The only difference is that I also was responsible for paying for their premiums as well. Realizing over time at my cost for this, I switched myself to a high deductible insurance plan with an HSA (health savings account). The HSA or health savings account is a tax deferred account where I can set money aside for any medical needs, separate from any bank or retirement account. For me, this was the most cost effective solution. This coupled with a subscription pay primary care group such as Flat Rock Health Seattle covers all my bases for health, wellness, and serious injuries.
Now that you are empowered with this terminology, I hope that each and everyone of you will understand some of the insurance company jargon. I hope that this will allow you the ability to make informed decisions for you and your family regarding your safety net (health insurance).