Health Insurance Basics
Health Insurance Basics
What is health insurance?
When you purchase a health insurance policy, you agree to pay a certain amount each month to the health insurance company. This payment is called a premium. In return, the insurance company agrees to help you pay your medical expenses, such as bills for medical services that help keep you well (like flu shots and checkups), for treatment you need when you are sick or injured, or for prescription drugs.
What if I can't afford it?
Under the Affordable Care Act, the overhaul of the health insurance system enacted in 2010, the federal government may help you pay some or most of the premium. Whether you can receive that assistance — and how much financial help you’ll get — largely depends on how much you earn, though other factors, such as the size of your family, also matter. Generally speaking, you may qualify for the benefit, called a subsidy, if you make up to four times the Federal Poverty Level ($47,520 for an individual or $97,200 for a family of four). To receive a subsidy, you must buy your plan on New York State of Health, the state’s health insurance exchange.
You also may be eligible for another kind of assistance, called a cost-sharing reduction (CSR) — a discount that lowers the amount you have to pay out of pocket for your insurance plan’s deductible, coinsurance and copays. You can get this discount if your income is below a certain level and you purchase a Silver category plan through New York State of Health.
Some carriers will also offer essential plans (EPs), also known as basic health plans (BHPs). These government-subsidized plans reduce both monthly payments and out-of-pocket costs. They will be available on New York State of Health for people with incomes as high as 200% of the federal poverty level. CareConnect is not offering EPs in 2017.
How much of my medical costs must I pay?
An insurance company has specific terms it uses when discussing your share of your medical costs. These include deductible, copayment (or copay), coinsurance and maximum out-of-pocket (MOOP) expense. The amount of each one will depend on the plan you purchase.
What It Is
How It Works
The amount you have to pay out of your own pocket before the insurance company starts helping you pay your medical bills. There are exceptions: Your plan may pay for some services from the start — typically, preventive care such as checkups, vaccinations, mammograms and screening tests to detect conditions such as diabetes.
Your plan has a $400 deductible. Your first medical bill is for $300, so you must pay the full amount out of pocket. Your next medical bill is also $300. You must pay the first $100 of that amount out of pocket to reach your $400 deductible. You and your insurance company each will pay a part of the remaining $200, and will share the cost of future bills for the rest of the plan year.
Your copay is a fixed dollar amount, such as $20, that you pay at the point of service. This is one way you may be required to share costs with the insurance company after meeting your deductible.
You have already paid $400 out of pocket, so you’ve met your deductible. The bill for your next visit to the doctor is $200. Your plan’s copay requirement is $20 for the visit, and the insurance company pays the remaining $180.
This is another way you may be required to share costs after meeting your deductible. Instead of paying a fixed amount at the point of service, you pay a percentage of the total cost, such as 20%.
You have already paid $400 out of pocket, so you’ve met your deductible. The bill for your next visit to the doctor is $200. Your coinsurance is 20% of the amount, so you pay $40. The insurance company pays the remaining $160.
Maximum out-of-pocket expense (MOOP)
This is the most you’ll have to pay for covered services during the time period (usually a year) that your insurance agreement covers.
You sign up for a plan with a $4,000 MOOP expense. You’ve had doctors’ appointments, an emergency room visit and a hospital stay, and have paid your $400 deductible plus $3,600 in coinsurance, or $4,000 total. Insurance will pay 100% of your medical bills for in-network care for the rest of the plan year.
A plan that covers more than one person — for example, a married couple and their child — usually has a family deductible. This deductible can work in one of two ways, as described below for a three-person family (Joe, Emma and daughter Natalie) whose plan has a $4,000 family deductible.
What It Is
How It Works
Family deductible only (nonembedded deductible)
The combined out-of-pocket spending on medical bills for all of the family members has to reach the deductible — $4,000 in our example — before the insurance company starts sharing the costs for any individual family member.
The family spends $2,000 out of pocket on medical expenses for Joe, $1,000 for Emma and $1,000 for Natalie. That’s $4,000 total — so for future medical bills in that plan year, the family will be responsible only for the copay or coinsurance.
Individual and family deductible (embedded deductible)
The plan starts covering a share of the costs for an individual in the plan when that person reaches his or her individual deductible — let’s say $2,000 for this example — even if the $4,000 family deductible has not yet been met.
The family spends $2,000 out of pocket on medical expenses for Joe, $500 for Emma and $500 for Natalie. On Joe’s next medical bill in that plan year, insurance will share the cost because his individual deductible has been met. But it will not share the cost on the next bill for Emma or Natalie: Neither has reached the individual deductible, and the family’s combined out-of-pocket spending ($3,000) has not reached the $4,000 family deductible.
How will insurance pay for my prescriptions?
Some plans have a separate deductible for prescription drugs. For example, when your coverage year under the plan begins, you may have to pay the first $100 in prescription costs yourself before the insurance company starts sharing those costs.
The amount your insurance company will pay for a prescription drug typically depends on its drug “tier” — a category determined by each insurance company. In a three-tier plan, you’ll pay the lowest amount for Tier 1 drugs, which are almost always generic versions of medications. You’ll pay the next-lowest amount for Tier 2 drugs, which are brand-name medications your insurance company would prefer you to use because they are as effective as drugs in Tier 3, but they cost less. You’ll pay the most for Tier 3 drugs, which typically are specialty drugs, or brand-name drugs that have a lower-cost, equally effective alternative. For example, you might have to pay $10 when filling a prescription for a Tier 1 drug, $35 for Tier 2 and $70 for Tier 3.
What’s the difference between “in-network” and “out-of-network”?
For many plans, the insurance company contracts with specific doctors, hospitals, laboratories and other providers to provide health care to plan members. (These contracts can include agreements on things like standards of care and the prices of medical services.) These health care providers are referred to as “in-network,” “preferred” or “participating” providers. Providers the insurance company does not have contracts with are described as “out-of-network.”
This distinction can greatly affect your costs. Some insurers, like many health maintenance organizations (HMOs) and exclusive provider organizations (EPOs), generally limit coverage to care from providers in their network; they will help you pay for out-of-network care only in an emergency or under special circumstances. (CareConnect is an EPO.) Others, like many preferred provider organizations (PPOs) and point-of-service (POS) plans, allow you to use out-of-network providers but require you to pay a significantly higher share of your bill when you do.
What’s a health savings account (HSA)?
Some low-premium plans combine a high deductible (as of 2017, at least $1,300 for an individual or $2,600 for a family) with a special kind of savings account, called a health savings account (HSA). You can withdraw money from this account to help pay your share of the bills for medical services and prescription drug costs.
You never pay taxes on money you deposit into an HSA and withdraw to pay for qualified medical expenses — you deduct the amount you contribute to an HSA from your gross income when filing your tax return, even if you don’t itemize other deductions. The interest the account earns also is tax-free. Because the tax advantages leave more money in your pocket for medical expenses, having an HSA can make it easier for you to meet the plan’s high deductible.
If you are interested in pairing an HSA with an eligible CareConnect plan, you can talk with your bank about setting one up. Your HSA is yours to keep; unlike a flexible spending plan, an HSA is not tied to an employer and there is no “use it or lose it” deadline. There is a limit to how much an individual or family can contribute to an HSA each year (for 2017, it’s $3,400 for an individual and $6,750 for a family).
Will my plan help pay all of my health-related costs?
No. Health insurance helps to pay for “covered services,” as defined by the individual plan. This includes most, but not all, medical expenses. Common expenses that aren’t covered include over-the-counter medications and cosmetic surgery. Each plan’s summary of benefits should tell you what is — and isn’t — covered. One other typical requirement is that a service must be medically necessary.
Need more assistance? Our Service Connectors are happy to help. Call them at 855-706-7545 from 8:00 AM to 8:00 PM Monday through Friday.