Sometime in the next few months you will have the opportunity to select a health plan for 2015. Your tendency may be to leave things as they are now and ignore the enrollment material you receive from your employer, Medicare or your current carrier. That may be a mistake!
The best advice I can give is to read every piece of information you receive. The offerings you have for 2015 and the cost to you probably changed, keeping what you have now may not even be an option. If you do nothing you could be placed in a default plan possibly resulting in a nasty surprise with your first expense in 2015.
No matter which health plan you select, you will have some out-of-pocket costs related to the health care you receive.
There are deductibles, co-pays, and coinsurance. Contrary to popular belief, health insurance is not designed to “pay everything” and if it did, it would be far less affordable than it is now. A plan not using deductibles or significant co-pays is likely to be a tightly managed plan, like a HMO. However, such plans are very few and far between.
The deductible is the amount you pay before your plan pays for any charges. In more traditional plans there will be an individual and family deductible. Let’s say the individual deductible is $200 and the family deductible $600. That means one individual in a family of four must meet the $200 deductible before any charges are reimbursed for that person, but it also means that once three members of the family have met their individual deductible, it is considered met for all other members of the family.
However, high deductible health plans (HDHP) which are growing in popularity among employers, work differently. Say there is a $2000 individual and $4,000 family deductible, in that case for a family, no benefits are paid until the entire $4,000 deductible is met by one or more family members combined. In other words, you will put $4000 out-of-pocket before you are reimbursed anything. There is an exception for certain preventive services, including preventive prescription drugs. Just because a plan has a high deductible does not automatically make it a qualified HDHP. A true HDHP must comply with IRS regulations and typically is coupled with a Health Savings Account (HSA) and must apply the deductible as described above.
Co-pays are fixed dollar amounts that must be paid when a service is rendered. For example, there may be a $25 office visit co-pay which the provider collects when services are rendered. A visit to a specialist may have a higher co-pay, a visit to the emergency room may have a significant co-pay which could be waived if the patient is admitted to the hospital. Prescription coverage may have a co-pay per prescription which varies based on the drug used (brand, generic, formulary or preferred).
Coinsurance has the same purpose as a co-pay except it is a percentage of the charge rather than a fixed amount. This means the more expensive the care you receive the more you pay as your share.
NOTE: many plans will use a combination of co-pays and coinsurance. For example, an office visit may have a co-pay while a visit to an urgent care center may have coinsurance.
The use of co-pays and coinsurance is designed to make you think twice before receiving health care and about where you receive it; skin in the game as they say. The insurance company is not trying to beat you, the idea is to minimize the unnecessary or frivolous use of health care which only drives up premiums for everyone … and yes, it does occur. In addition, these payments are designed to encourage you to use in-network health care providers. Going out-of-network will typically increase your co-pay or coinsurance and in some cases, you will have no coverage out-of-network.
Out-of-pocket limits as the name implies is an amount above which your coverage pays 100% of charges (but could be based only on reasonable and customary charges and/or charges from network providers). Let’s say your plan has an individual deductible of $750 and reimburses charges at 80% until a total of $5,000 has been incurred. This means the out-of-pocket limit is $1,000 (20% of $5,000) PLUS your deductible. Soooo, plan on paying $1,750 OOP. This information is helpful when determining an amount to be placed in a FSA or HSA. The OOP limit for a high deductible health plan will be higher than this example.
Medicare does not have an out-of-pocket limit which is why many beneficiaries buy supplemental coverage.
Coordination of benefits
Frequently a married couple will both have health insurance available and frequently they both take employer-coverage. This is okay except when both cover each other and both cover children. To prevent the duplicate payment of health insurance claims, which is basically a waste of money, employers and insurance companies employ coordination of benefits. That simply means that one insurance will pay its normal liability on a claim and the second carrier will pay up to the different between the total eligible charge and the amount paid by the first coverage.
If the claim is for either adult, their coverage is primary and pays first. If the claim is for a child, the plan of the parent with the earliest birthday in the year pays first. That is, if one parent was born in March and the other in November, the plan of the parent born in March pays first; the primary coverage. If the birthday rule doesn’t work because both parents were born on the same date, the plan in effect longest pays first.
Medicare also has coordination of benefit rules which you can see here
Years ago when employees paid little or nothing for health insurance, having dual coverage may have been a good deal. However, today with hefty employee contributions, you need to question whether it is worth paying for two plans. I suggest it probably is not, but you need to balance the cost of coverage, with the possible benefits, which includes estimating the claims which may be incurred for your family.
If your spouse has coverage available through his or her employer, your plan may charge you an extra premium to enroll that person on the basis that the liability for any claims rightly belongs with another employer. This is fair. You need to check your plan rules.
If you have dual coverage available you must look at the coverage, and the premium paid by you and your spouse for both single and family coverage. Only then can you determine the best way for each of you to be covered and which plan should cover the children.
Don’t assume what you are doing now, is what you should be doing in the future, you may be wasting a great deal of money in premiums.
Watch for these upcoming posts over the next few weeks:
Preparing for Health Benefits Open Enrollment (Types of Health Plans) Part 3 September 23
Preparing for Health Benefits Open Enrollment (Using the FSA and HSA) Part 4 September 30
QUINNSCOMMENTARY 
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