Health care costs in the United States continue to rise every single year. The latest data from the Centers for Disease Control & Prevention (2014) showed that the per capita national health expenditures amounted to $9,523, bringing the total national health expenditures to $3 trillion. More recent studies further indicate cost increases. According to news reports, Americans now spend more than $10,000 per person on various health care services.
In a time like this where getting sick can severely affect not just a household’s finances but the overall quality of life an individual has, it definitely pays to have health insurance.
Breaking down the process
Basically, policyholders pay a premium to their health insurance company. This already covers them for a specified amount of time. During this period, in the event they get sick or injured, pay their physician a visit, or undergo medical tests, they don’t have to worry about out-of-pocket costs. And even if they have to spend money, they can expect to have significantly lower expenditures.
Get to know your policy options
Health insurance is quite complex and complicated, so it’s important for consumers to first equip themselves with at least the basic knowledge of the available plans to make the right decision.
Note that consumers have several different choices when it comes to choosing coverage. For those purchasing from their own state’s marketplace or maybe from an insurance broker, they can choose from four different health plans, namely: bronze, silver, gold, and platinum. Bronze plans provide the least coverage, while platinum plans provide the most.
As you can see, the main difference among these plans is the set share of costs they pay for an insured person. Details can vary widely across the different plans, as do the deductibles – the amount an enrolled individual has to pay for before the insurer covers the entire incurred health care expenditures. Bronze plans carry the highest deductibles.
Purchasing branded insurance
For consumers who would like to purchase insurance from a private brand or company, they can usually choose from the following plans:
Health Maintenance Organizations (HMOs)
HMOs deliver all types of health services through their extensive network of health care facilities and providers. And while these limit the freedom of policy holders when it comes to making preferred choices in health care providers, they also have the least amount of requirements. Also, HMO patients have a primary care doctor who manages their care and refers them to other specialists (also associated with the insurer). This way, insured individuals can receive the care they need and rest easy knowing their insurance has it covered.
Preferred Provider Organizations (PPOs)
PPO patients have more freedom to choose their health care providers than the HMO ones. One reason is because they won’t need to obtain a referral from a primary physician just to see a specialist. However, they would have to spend more money for out-of-pocket expenses when they choose to see an out-of-network doctor.
Exclusive provider organizations (EPOs)
EPOs, like PPOs, offer their patients more freedom than HMOs when it comes to choosing preferred health care providers. However, they don’t provide coverage for seeing providers outside their network. Unless it’s an emergency, the policy holder would have to shoulder all the expenses of seeing an out-of-network doctor.
These plans combine different features from HMOs and PPOs. POS policy holders have the freedom to choose their health care provider, although they have to submit more paperwork when seeing out-of-network doctors. And similar to HMO plan holders, those with POS plans also have a primary care giver managing their care and referring them to specialists.
What influences your health insurance rates
Insurance companies review the risk profile of their applicants to determine not just the rates they will charge, but also if they qualify for coverage. They use a wide variety of factors to reach a decision, and these come from the information entered through the individual application. Each insurer utilizes a different scoring model to calculate their clients’ premium. However, the most common variables they use include the following:
- Age. All things equal, the younger the person, the lower the health insurance rate is; hence, the lower the premium.
- Health history and record. Having a history of any kind of chronic disease can increase one’s rate.
- Current health status. Health insurance applicants typically have to undergo a medical examination for assessment. The insurer will then look for signs of hypertension (high blood pressure) or other issues that could indicate future health problems. People with no past medical history generally receive lower rates.
- Weight. Being overweight or obese (determined through one’s height to weight ratio scale) will lead to higher insurance premiums, as these weight concerns increase one’s risk for health problems in the future.
- Smoking habits. Those who smoke and use nicotine-containing products, such as tobacco cigarettes, e-cigarettes, and nicotine patches have greater risks of developing a wide variety of diseases. Thus, insurance companies charge them higher rates.
- Frequency and amount of alcohol consumption. Heavy alcohol consumption can significantly affect a person’s health. This is why insurers also factor in drinking habits aside from smoking habits. They look at how often – and how much – one drinks.
- Hobbies. For those who partake in high-risk recreational activities, such as rock climbing, scuba diving, and skydiving, expect to see higher health insurance rates.
- Family History. Health insurance applicants who have a family history of serious and major illnesses, like cancer and heart disease, often pay more towards their health insurance.
- Gender. Statistically, women have less-risky behavior than men, resulting in them living longer. Thus, insurers typically charge women lower insurance rates.
And of course, the policy itself that a consumer will choose will determine what kind of money he/she will spend towards health insurance.
Buying enough coverage without going beyond your budget
The key to ensuring one remains adequately covered with health insurance without exceeding what he/she can afford is to first determine how much coverage he/she really needs. Comparison is one of the most effective ways to arrive at the best health plan option.
To determine just how much coverage one should get when purchasing health insurance, one should compare the following:
Most online marketplaces and private insurers provide summaries of their health plan offers, together with the cost. It’s also important to check the provider directory, which consists of the participating health facilities (hospitals, emergency departments, clinics, dental offices, etc.) as well as doctors.
When comparing the various available plans, a family’s health and medical needs should remain the priority. Taking into consideration previous treatments and health care services can help consumers make a much more informed decision.
As discussed above, health plans have varying regulations when it comes to seeing doctors. Of course, going to an in-network physician means zero to minimal out-of-pocket expenses. Some health plans may allow policyholders to work with out-of-network doctors for less, but there are some wherein the patient would have to shoulder all costs.
If you have preferred doctors and want to keep seeing them, make sure they’re in the provider directories for the plan you’re considering. You can also directly ask your doctors if they take a particular health plan.
If you don’t have a preferred doctor, you’ll probably want a plan with a large network so you have more choices. A larger network is especially important if you live in a rural community since you’ll be more likely to find a local doctor who takes your plan.
Compare potential out-of-pocket expenditures.
Just as important as the size of the network is cost sharing. So when looking at the summary of the different health plans, it’s important to check how much the insured person’s share is. Shoppers should have a basic understanding of the most common terminologies used in the insurance world, including deductibles, copayments, and coinsurance. Also, keep in mind that the lower the premium one will pay for, the higher the potential out-of-pocket expenditures.
When getting greater coverage makes most sense
Since there are different cost-sharing options, the goal is to narrow them down based on the potential out-of-pocket expenses. Basically, a plan that covers a greater portion of the medical costs (but also comes with higher monthly premiums) makes sense if the policyholder:
- Frequently sees a doctor, whether a specialist or a physician
- Frequently requires emergency care
- Regularly takes branded or expensive medication
- Expects a baby or plans to have one
- Will undergo a planned surgery
- Has recently been diagnosed with diabetes, cancer, or other types of a chronic condition
On the other hand, consumers who are in generally good health and rarely see a doctor can opt for a plan with less insurer-covered expenses.
Other strategies to save money while remaining insured
Aside from buying just the right amount of health insurance coverage, there are plenty of other ways to reduce health care costs. Here are just a few of them:
- Verify what existing plans cover. A household with several health plans can actually make these existing coverages work together. It’s possible that a spouse’s policy covers some expenses of the included beneficiaries. These little things can already significantly reduce health care costs.
- Consider working with a broker. Receiving assistance from someone who knows the ins and outs of health insurance will help consumers make smarter, more financially-wise decisions. With the services of a health insurance broker, policy shoppers will have an easier time working within their budget without doing everything on their own. These professionals don’t just have an extensive knowledge of the various types of health plans in the market; they can also help consumers find a plan that best suits their family’s needs.
- Avoid medical billing errors. Checking medical bills for mistakes won’t just save consumers a lot of money, they will also help keep overall costs of health insurance at a minimum. Always remember that insurance companies also take into consideration previous treatments and medical services when calculating risks. So when they see these on a health report (whether or not a mistake), they will potentially charge higher rates.
How big an impact having no health insurance makes
With the seriously high expenditures associated with health care and medical services, developing an illness can quickly eat up one’s salary and drain his/her savings in just a short period of time. Going without insurance would mean hundreds of dollars of out-of-pocket expenses for just a single visit to the doctor. Without coverage, a three-day hospitalization can already rack up tens of thousands of dollars.
Most consumers can’t afford to cover all these costs using just their salary or savings. The worst part is, anyone can become ill or get into an accident that results in injuries. All these raise the importance of having health insurance, which can significantly reduce health care expenses to more affordable amounts.
Health insurance at its core
Health insurance protects two of the most important components in a person’s life: finances and health. Health coverage provides a safety barrier for one’s life savings from the potentially devastating costs associated with medical emergencies, chronic diseases, or major accidents. However, it also provides the insured with a way to obtain health care services when he/she needs it.
In other words, its two primary goals include: protecting an individual’s assets and ensuring they can maintain their health by receiving necessary health care without paying up huge amounts. All in all, regardless of the costs associated with purchasing and maintaining health insurance, it is one of the most useful insurance products anyone can benefit from.