Whether you’re enrolling in a new health insurance plan at work, wondering whether or not your current insurance is right for you, or just puzzling over the different variables, health insurance can be a confusing issue! But with my canine savvy, I can help you understand the basics so you can make educated decisions about your health insurance needs.
Why do people (and some animals, like me) have health insurance? Health insurance is used to cover future medical bills that you would not be able to pay all up front on your own. That future cost is not always easy to estimate, since we don’t always know what medical needs we might have in store.
Here’s an interesting fact: In 2009, 1.5 million Americans declared bankruptcy. Of those bankruptcies, 62% were related to medical expenses. And get this: 75% of those people had health insurance! Clearly, we need to better educate ourselves on choosing and using health insurance.
Every health plan has some key parts:
- Deductible: This is the amount you pay before insurance kicks in.
- Premium: This is what you pay on a periodic basis (monthly, quarterly, etc.) to keep your insurance current.
- Co-Pay: This is the flat rate you pay for certain services.
- Co-Insurance: Once insurance kicks in, this is the percentage of cost that you pay.
- Cap: This can refer to several things:
- The limit that a company will pay per year (annual cap).
- The limit that a company will pay ever (lifetime cap).
- The maximum amount you will be required to pay per plan period (out-of-pocket cap).
Your premium will be determined by how much you are willing to risk paying out of your own pocket for health expenses and how much you want covered by insurance, as well as other factors like how old you are and what your health is like.
Types of Plans:
- HMO: As a member of a Health Maintenance Organization, you agree to use only the doctors and providers who are part of the network. Providers outside the network will not be covered except in an emergency. This is like choosing one pet store and agreeing to buy all your dog food there. Limiting yourself to the HMO network reduces your total cost because they know they have you as a customer.
- PPO: Preferred Provider Organizations also have a network, but you can still get partial coverage for services outside of the network. This is like having dog food coupons for one pet store but being free to buy dog food anywhere, including over the internet. This kind of plan offers more choices and is thus more expensive than an HMO. (A silly thing that helps me remember the difference between HMO and PPO is that the letter P is higher up in the alphabet and therefore is the more expensive of the two types of plans.)
Two Ways to Reduce Costs Using Pretax Dollars:
Most people don’t fully understand these next two features of health plans, so pay close attention!
- Flex Account (offered by employers): Each year you decide to defer a certain amount of your income (up to a legal limit) into your flex account. You then give claim forms to your employer to be paid out from the flex account tax-free. If you don’t use the money that year, it is returned to the employer.
- HSA: You buy a policy from among many designated high-deductible health insurance policies, then you or your employer deposits money into a Health Savings Account in your name to be used toward the deductible. Unlike a flex account, HSA money is always yours. As long as it is used for healthcare, no tax is due.
What Does the Affordable Care Act (Obamacare) Change?
I’ve been getting asked this question a lot: “How is Obamacare going to affect me?”
The Affordable Care Act (ACA) eliminates the biggest causes of healthcare bankruptcy, specifically annual caps (payment maximums), lifetime caps, and denial or cancellation of coverage.
Practically, what does this mean for you?
- Insurers can no longer deny kids coverage.
- Your kids can stay on your insurance policy through age 26.
- Insurers can’t drop you if you get sick.
- Health insurers profits are limited, and they must rebate any excess premiums.
- Medicare patients receive free preventive care.
- The Medicare donut hole is smaller.
- No more limits on lifetime benefits.
Those changes have already happened. Next year, these additional changes will take place:
- Insurance exchanges will be up and running in all states.
- Health insurance will be required, no one may be denied insurance, and there will be a penalty for being uninsured.
- Premium Tax Credit.
- Employers with fifty or more employees will have to provide health insurance. (This has already been the law in some places.)
- There will be a penalty for employers not providing health insurance coverage to employees.
- No more limitations on annual benefits.
What if you still can’t afford the subsidized premium and you can’t afford to raise the deductible? You may want to consider short-term medical coverage. Short-term is excluded from the ACA, allowing short-term to eliminate some of these requirements; this means a short-term coverage provider can charge a lot less, especially for healthier people. Depending on the state, short-term is available for terms of up to one year. It can fill the eligibility gap when switching jobs or be used for extended periods. Short-term will not cover preexisting conditions, and it is not available to those who qualify for Medicare or Medicaid.
If you still have questions regarding how short-term medical coverage works or how Obamacare will affect you, ask a professional! And remember, if you want to keep your nose cold and your tail wagging, insurance is an important part of a healthy lifestyle!