October 6, 2015

The Young Professional’s Guide to Health Insurance

 

Congratulations- you’ve graduated college, earned your first job and now you need health insurance.  If you’re anything like I was at this point, not only are you uninterested in this process but you are also quite confused.  Perhaps they go hand in hand?

health insurance guide

Well the fact is, you need to start paying attention.  Healthcare consumption by millennials is increasing at a rapid rate and if you would like to avoid becoming one of the nearly 51 million or 1 in 5 Americans facing medical debt this year, you should learn how it all works.

Healthcare is a beautiful thing…until it isn’t.

At Dispute, we’ve come up with a list of 14 important health insurance terms we want you to master. Learn these to avoid high out-of-pocket costs, confusion, stress, collections notices, debt, and angry parents.

 

Health Insurance

The age of 26: No, this isn’t a birthday to celebrate one year after 25…26 means you can no longer be covered under a parent’s health insurance plan, a luxury made possible by the Affordable Care Act. Are you approaching this age? Think fast, coverage ends on your 26th birthday. If you’re employed, speak to your HR representative today and begin planning for this adjustment. According to Time, today 83% of employees under 26 are eligible for health insurance at work but only 44% utilized their employer-subsidized health coverage. However, three-quarters of eligible employees aged 26 to 39 enrolled in an employer health plan. What lesson can we learn? It might not be a bad idea to stay on mom and dad’s plan as long as you can.

 

Deductible

Deductible: A deductible isn’t the amount you deduct from a paycheck.  In health insurance, a deductible represents the amount you pay each year towards your medical expenses before your health insurance begins to pay.  For example, a $2,000 deductible means you would have to pay the first $2,000 of medical costs out-of-pocket before your insurance takes over. A report by Forbes stated that nearly half of the nation’s large employers are offering a consumer-directed health plan, which uses a high deductible strategy and lower premiums to shift the total cost of healthcare ownership to the consumer. The motivation behind this strategy is said to encourage consumer awareness and stimulate greater choice when selecting a provider.  Message here: while the premiums and amount taken out of your check are low, recognize that insurance doesn’t take affect until your deductible is met.  For those under 26, seriously consider how you stay on mom’s plan.  Those 26 and above, make sure to read the fine print and consider the various options you have.

 

Coinsurance

Coinsurance: Is the amount that you’re going to pay versus the amount your health plan will pay. Coinsurance takes effect after you’ve paid your plan’s deductible amount. For example, if a service is covered at 60%, that means your health plan will cover 60% and you will pay 40% of the cost. Because the insurance may limit coverage for certain services, your coinsurance responsibility may vary. Review your benefits summary for the coinsurance amounts for various covered services.

 

Co-Payment

Co-Payment: A copay is a fixed amount of money you pay for a particular service or medication. Copay amounts will vary by service or medication type and are required whether you have met your deductible or not. For example, you might have a $20 co-pay per doctor’s visit but a $200 co-pay for outpatient surgery.

 

In-Network Insurance Providers

In-Network: This is the list of providers your insurance company maintains who have agreed to accept payment at negotiated rates for various services. When choosing a policy it’s important to understand the size, convenience, and quality of your network as well as any specializations you require for care. You may find a list of “in-network” providers by searching your insurance providers online portal.  FYI: the cost of your premium may affect your level of coverage and ultimately, your “in-network” group. If cost is an important driver, recognize that convenience and quality may suffer as a result.

 

Out of Network Insurance Providers

Out-of-Network: Know this term well. This is any provider who is NOT part of your health plan. Meaning they’re not on your roster, on your team, or in your network. While some plans will still share part of the cost for out-of-network providers, other’s will not and this is where you can really rack up costs. The goal is to always select the most complete network or the best network to fit “your needs.”

 

Flexible Spending Account

Flexible Spending Account: FSA’s, AKA Health Savings Accounts are tax-exempt accounts where you can declare a pre-tax amount that will be given to you in total at the beginning of your plan year and then deducted evenly per paycheck throughout the year. Before enrolling, forecast an annual allotment of medical expenses. That sum will be dispersed evenly from your pretax paycheck into an FSA. It can even be all used in the beginning for major purchases like Dental or Vision or Deductible charges. Childcare charges are slightly different.

 

Out of Pocket Expenses

Out-of-pocket expenses: These are the costs for medical care that are not covered by insurance. This includes copays, deductibles, coinsurance, and costs for certain expenses, such as elective surgery or treatments that are not covered by insurance.

 

Out of Pocket Maximum

Out-of-pocket maximum: Your out-of-pocket maximum is the total out-of-pocket cost you will pay in a calendar year before your insurance plan starts to pay 100% for covered services. These accrued annual costs include deductibles, copayments, and coinsurance within your network. Remember, not all services are covered at 100% and not all services count toward your limit, such as out-of-pocket expenses for non-covered services like cosmetic surgery.According to healthcare.gov, the maximum out-of-pocket costs for any major medical health insurance plan for 2015 are $6,750 for an individual plan and $12,900 for a family plan.

 

Monthly Premium

Premium: This is the monthly payment you make to your insurance company to maintain coverage. These costs never count towards your deductible or out-of-pocket maximum and act more like a required subscription fee for access to their network and coverage. Buyer beware. A higher premium will mean a lower deductible and out-of-pocket maximum. Conversely, a lower premium might result in a higher deductible and smaller group of “in-network” service providers. A bankrate survey found that almost half of 19-29 year-olds prefer a health plan with a lower deductible and higher premiums- meaning millennials prefer to take more out of their paychecks every month for a premium and less out-of-pocket in expenses.

 

Coordination of Benefits

Coordination of Benefits: This is the process by which health plans coordinate benefits for applicable services when you are covered by more than one health plan. This is when the insurance company determines if it should be the primary or secondary payer of medical claims. Just over 50% of cases worked by Dispute reflect a Coordination of Benefits Error, meaning the wrong insurance company was billed as the primary payer.

 

HMO – Health Maintenance Organization Plan

HMO: Health Maintenance Organization plan is a restricted network where a referral is usually required by your primary care physician for all other health care services, except in an emergency. This can be a more affordable plan but choose wisely. In order to receive specialized services, you must first receive a referral from your PCP, which may not be the most convenient or efficient course of action.

 

PPO – Preferred Provider Organization

PPO: Preferred Provider Organization plan where you are choosing among a designated network of physicians, giving you the flexibility to choose any provider, with or without a referral, inside or outside of your network. While this type of freedom in choice would suggest flexibility, it can also be restrictive in some ways. Out-of-network providers come with a higher price tag and greater flexibility often comes with a higher monthly premium. Do your best to make sure all of your specialists are part of the same network and the follow the guidelines closely.

 

EPO – Exclusive Provider Organization

EPO: Exclusive Provider Organization plan combine elements of both the HMO and PPO plans but do not include the requirement to choose a primary care physician or receive referrals to see a specialist. However, you can only use the providers within your EPO network and cannot go outside of the network for care, which may be limited.  Any provider outside of this network will result in out-of-pocket costs so review this network wisely to make sure you’re satisfied with the amount of providers.

The message here: take charge of you care. IT MATTERS. A misunderstaning or lack of clarity in any of these terms may cause severe emotional and financial damage.  Whether you receive care by way of a parent’s plan or through your employer, do your research in advance.  Review your plan’s network and charges and think about how those correlate to your specific needs.

 

Good luck!

About the Author
Matt Moulakelis

Matt Moulakelis the Co-Founder and CEO of DisputeBills and a fellow Bill Fighter who left his corporate job and founded DisputeBills after personally going through the negotiation process.