Guide to Buying Health Insurance for 2015: How Health Insurance Works
Our guide to buying health insurance for 2015 walks you through how health insurance works and how to buy health insurance plans under Obamacare. Let’s take a look at how ObamaCare affects buying health care plans, different ways to buy health insurance under the Affordable Care Act, how to understand terms like deductibles, out-of-pocket maximums, HMOs, and HSAs and how to choose the plan that has the right benefits, networks, costs and coverage for you and your family.
Buying the Right Health Insurance Policy
A plan with a high deductible and high out-of-pocket costs is rarely worth the low premium cost, even with subsidies taken into account. Although the plan will protect your health and wallet in an emergency, you’ll most likely pay for most of your medical expenses out-of-pocket each year without ever meeting your deductible. This means you’ll pay your premium and all health care costs, with your insurer paying nothing but specific preventive services (which are now free on all plans because of the ACA).
In many cases a lower tier health plan will mean putting off treatment or paying more than you would with a slightly better plan. Shop smart! We recommend a plan with no more than a $2,5000 deductible and at least 70% out of pocket expenses covered (this means getting a silver plan or better on the marketplace). Remember better plans often come with better doctor networks and lower co-pays. Even though all plans come with new essential health benefits only the specific preventive services are included with no out-of-pocket costs before you meet your deductible! The better your plan, the cheaper it will be to take full advantage of your health insurance policy and your doctor network.
What Do I Need to Know About How Health Insurance Works in 2014 and beyond:
Before we get to the details there are a few things everyone should know about health insurance for starting in 2014.
• The individual mandate says that the 15% of Americans who don’t currently have insurance will have to obtain health insurance (known as minimum essential coverage) by 2014, get an exemption, or pay a per month fee.
• If your insurance costs are unaffordable due to income you may get subsidies to buy insurance and/or an exemption from both the fee and the mandate. 24 million people will be exempt from the fee by 2016.
• If your employer offers coverage, you have access to Medicare, Medicaid or CHIP you won’t have to pay the fee and can keep your plan.
• Make sure to do your research before you buy your health insurance for 2014, although most plans will count as “minimum essential coverage” and thus will exempt you from the individual mandate there are types insurance that don’t count including limited coverage for dental and vision only.
• All plans starting after 2014 offer the same benefits, rights and protections including essential health benefits, preventative services and check-ups at no out of pocket costs. The big difference between plans will be premium costs, out-of-pocket expenses and provider networks.
• If you are planning on shopping on your State’s health insurance marketplace you’ll need to understand “metal plans”. Metal plans are a type of qualifying health plan that counts as “minimum essential coverage” and are sold only on the marketplace. Learn more about “metal plans”.
• Health insurance doesn’t just cover you if you get sick. It also covers things like mammograms, maternity, check-ups for your kids and many other services at no out-of-pocket costs and protects you if you get an an accident.
• The “free” plan isn’t always the best one. Read our guide to buying health insurance for 2014 to make sure you choose the right plan. As a rule of thumb most Americans should aim for a “silver plan” equivalent or better. Silver plans typically have reasonable balance of out-of-pocket and premium costs. There are a lot of factors that go into finding the right plan beyond premium costs, trying to save money upfront could cost you more in the long run.
• Some plans will offer lower deductibles or premiums but won’t offer co-pays until deductibles are met. Others will offer higher deductibles for lower premiums. Others may offer attractive rates but have a more narrow network. Make sure to think about what medical services you are likely to use when picking your plan.
• Policies issued before 2010 (“grandfathered” health plans) don’t have to adhere to all the new rights and protections offered by the Affordable Care Act. If you have a grandfathered plan you may want to or even have to shop for new health insurance in 2014. If your provider is discontinuing or changing your plan they will let you know.
• ObamaCare takes measures to prevent all types of discrimination in regards to your right to health care. Factors such as pre-existing conditions, health status, claims history, duration of coverage, gender, occupation, and small employer size and industry can no longer be used by insurance companies to increase health insurance premiums.
• The only factors that can affect premiums of new insurance plans starting in 2014 are your income, age, tobacco use, family size, geography and the type of plan you buy. This applies to all plans sold through your State’s health insurance marketplace.
• Premium costs are the amount you pay each month. Plans with higher premiums have lower out-of-pocket expenses.
• Types of out-of-pocket expenses include copays, coinsurance, deductibles and out-of-pocket maximums.
• The amount you pay out of pocket is based on the actuarial value of your plan (the actuarial value is the amount of out-of-pocket costs your insurer pays.)
• Cost sharing refers to your share of the cost.
• There are three ways to buy health insurance in 2014 1) Your State’s Health Insurance Marketplace 2) A Broker 3) Direct from a provider. Each have it’s own pros and cons.
Ways to Buy Health Insurance:
There are three different ways to buy health insurance plans for 2014. You can compare and buy different types of “Qualified Health Plans” on your State’s health insurance marketplace or purchase a traditional private insurance plan outside of the marketplace either directly through the insurer or a broker.
Let’s take a look at the three different ways to buy health insurance plans:
1. Using your State’s Health Insurance Marketplace to buy and compare health plans: Most Americans can use their State’s health insurance marketplace to buy and compare health plans.
The benefits to buying a plan through your State’s marketplace is that you may be eligible for cost-assistance for premiums and out-of-pocket costs if you make less than 400% of the Federal Poverty Level. Shoppers can also use the health insurance marketplace to compare health plan benefits, networks, costs and coverage from competing providers.
Please note that premium cost assistance is offered as advanced tax credits which get paid directly to your provider. Tax credits lower the part of the monthly premium you pay, but if you gain or lose income you will be responsible for the difference on your year end taxes.
When you apply for your State’s marketplace you will find out if a family member qualifies for Medicaid, Medicare or CHIP. Although competition drives marketplace costs down, insurers must pay a fee to sell insurance on the health insurance marketplace and therefore insurance you buy may in some cases be cheaper through a private insurer or a broker.
2. Contact an Insurer to buy and compare health plans: You can contact an insurer and buy a health health insurance directly from the provider.
Buying health insurance directly from a provider means that you are cutting out the middle-man. If you aren’t eligible for cost-assistance through the marketplace and you have a clear idea of what type of coverage you need, this could be the best option for you. Both private brokers and the marketplace charge the insurance provider additional fees that could increase the cost of your health insurance. Of course you’ll only be able to compare health plans by that provider.
3. Speak to a Broker to buy and compare health plans: You can speak to a broker (or use an online broker like ehealth) and they can help you find your best option for health insurance.
If you don’t qualify for cost-assistance and want someone to help you compare and understand plans then a broker could be the best option for buying health insurance. Brokers will have a selection of different health plans in your State and will help you to be able to understand and compare benefits, networks, costs and coverage. Please be aware that brokers get a fee for selling you insurance. Although the fee is charged to the health insurance provider and not the consumer, it doesn’t mean the fee won’t be passed onto you.
NOTE: Many brokers and health insurance companies
The following video explains how ObamaCare changes the way you buy health insurance:
How to Sign Up For The Health Insurance Marketplace
There are four ways to sign up for your State’s Health Insurance Marketplace.
1) Find your State’s marketplace website.
2) Get in person help. You can find inperson help by going to LocalHelp.Healthcare.gov.
3) Call the 24/7 marketplace helpline 1-800-318-2596.
Other Ways to Buy Health Insurance
Paper applications and the telephone: The federal government created paper applications you can use to find out whether you qualify for government programs like Medicaid, or for tax credits that help cover the cost of private insurance premiums. You can also sign up for the marketplace by mailing in an online application (read these instructions first). The marketplace help line is available for 24/7 assistance (800) 318-2596.
Navigators and other in-person assistance: The health-care reform law created new types of workers whose job it is to help people apply for financial assistance, insurance and government benefits like Medicaid and the Children’s Health Insurance Program. These assisters can’t charge for their services, can’t take money from insurance companies and must show consumers all their options. Contact information for such organizations is available here LocalHelp.Healthcare.gov. While HealthCare.gov remains faulty, navigators and others can still get you started and follow up with you later about completing the process.
State Medicaid offices: If your income is low enough, you and your children may qualify for Medicaid or the Children’s Health Insurance Program, either under the existing rules or via Obamacare’s Medicaid expansion. Eligibility rules vary widely from state to state. The federal government provides links to state Medicaid agencies on HealthCare.gov.
Medicare.gov: If you are 65 years or older you’ll get your health insurance through Medicare.
Health insurance companies: Insurers commonly allow sales through their websites and call centers. Consumers can review a list of what insurance companies and plans are available in their states — and even the average prices — via a section of HealthCare.gov that’s working.
Web-based insurance brokers: Not to be confused with the government-run exchange websites, these private companies offer some of the same conveniences, like the ability to compare multiple plans on price and benefits. Vendors including eHealthinsurance, GoHealth and GetInsured are approved to allow shopping and enrollment through the federally run health insurance exchanges. These brokers are paid by insurance companies, so consumers aren’t charged a fee.
What is Health Insurance?
What exactly is health insurance? The following video will help you understand what health insurance is and why you need it.
Comparing Benefits of Health Insurance Plans
When comparing health plan options you’ll need to take into account what benefits plans cover. Luckily ObamaCare has evened the playing field. Today all health plans have to cover a number of Preventative Services at no additional cost and provide Essential Health Benefits with limited out-of-pocket expenses and no annual or lifetime dollar limits. Insurance sold to individuals and small businesses must now include these Ten Essential Health Benefits include:
- Emergency services
- Laboratory tests
- Maternity and newborn care
- Mental health and substance-abuse treatment
- Outpatient care (doctors and other services you receive outside of a hospital)
- Pediatric services including dental and vision care.
- Prescription drugs
- Preventive services (such as immunizations and mammograms) and management of chronic diseases such as diabetes
- Rehabilitation services
ObamaCare’s new rules make sure all insurance plans cover the same basic benefits. When shopping for insurance you’ll be focusing more on comparing network and cost-sharing. Plans with higher premiums will tend to have better networks and less cost-sharing.
Comparing Networks of Health Insurance Plans
When looking at health plans you will be comparing networks of providers—doctors, hospitals, laboratories, imaging centers, and pharmacies that have signed contracts with the insurance company agreeing to provide their services to plan members at a specific price.
Networks are broken down between prefered network (everything is covered), in-network,
If a doctor is not in your plan’s network, the insurance company may not cover the bill, or may require you to pay a much higher share of the cost (although some of ObamaCare’s new rules do limit what you can be charged for using certain services out of network). So if you have doctors you want to continue to see, you will want them to be in the plan’s network.
If you are shopping in a marketplace, you can see each plan’s provider directory and compare it to those offered by other plans.
If you are considering insurance through a job, you can obtain provider lists from participating insurance companies, or from the company’s employee benefits department.
Comparing Costs of Health Insurance Plans
You pay for health insurance in two ways:
- The monthly premium that you pay to purchase your plan.
- The share of costs you pay out of your own pocket when you receive medical care. Those are some combination of deductibles, coinsurance, and copays.
In general, if you pay a higher premium up front, you will pay less when you receive medical care, and vice versa.
To make comparison easier, the plans sold in state marketplaces will be in standardized “metal tiers” with various combinations of premiums and cost-sharing:
- Bronze plans will cover 60 percent of the average member’s total health care costs and thus have the lowest premiums.
- Silver plans will cover 70 percent.
- Gold plans will cover 80 percent.
- Platinum plans will cover 90 percent and have the highest premiums.
Which of those plans is right for you depends on your health and your financial situation:
- If you already know you have an expensive medical condition, consider a plan with a higher premium that covers more of your costs.
- If you are generally healthy you might come out ahead paying a lower premium and a bigger share of your health costs, because those costs are most likely not going to be that high. Of course, you need to be prepared to pay more if you do unexpectedly become sick or injured.
How Much Do Health Care Plans Cost?
There are a number of factors that affect the cost of your health plans. This is true for health care plans purchased on or off of the health insurance marketplace. Health status and gender can no long affect the cost of your insurance, but the following factors can.
- Your age
- Your smoking status (some regions do not allow smoking status to be considered). There is a 50% tobacco surcharge that is added after cost assistance starting 2015.
- Where you live
- The number of people enrolling with you (e.g. a spouse or child)
About Cost-Sharing: Types of Out-of-Pocket Costs on Health Insurance Plans
The terms “cost-sharing” or “out-of-pocket costs” refer to the proportion of your medical bills you will be responsible for paying when you actually receive health care. Cost-sharing never includes your monthly premium, balance billing amounts for non-network providers, or spending for non-covered services.
If you buy insurance through your state marketplace, you’ll be able to see and compare the cost-sharing structure of plans before you buy. If you get insurance through a job, the information will be on the Summary of Benefits and Coverage form.
These are the four cost-sharing terms you will see.
Deductible. The amount you pay every year before the insurance company starts paying its share of the costs. If the deductible is $2,000, then you would pay cash for the first $2,000 in health care you receive each year, after which the insurance company would start paying its share. In every plan you can buy, preventive services will be covered in full even if you haven’t used up your deductible for the year. Some plans will also pay a portion of your costs for a few other services, usually doctor visits and prescription drugs, even before your deductible has been met. In general plans with higher premiums have lower deductibles, and vice versa.
Copay. A fixed dollar amount you pay for certain types of care. You might pay a $20 for a doctor visit and the insurance company will pick up the rest. Plans with higher premiums generally have lower copays, and vice versa. And some plans do not have copays at all. They use other methods of cost-sharing.
Coinsurance. A percentage of the cost of your medical care. For an MRI that costs $1,000, you might pay 20 percent ($200). Your insurance company will pay the other 80 percent ($800). Plans with higher premiums generally pick up a larger portion of the bill.
Out-of-pocket limit. The most cost-sharing you will ever have to pay in a year. It is the total of your deductible, copays, and coinsurance (but does not include your premiums). Once you hit this limit, the insurance company will pick up 100 percent of your costs for the remainder of the year. Most people never pay enough cost-sharing to hit the out-of-pocket limit but it can happen if you require a lot of costly treatment for a serious accident or illness. Plans with higher premiums generally have lower out-of-pocket limits.
The latest smartest video explaining how ObamaCare and the Health Insurance Marketplaces work. Don’t forget to apply for your State’s marketplace today! Find your State’s Health Insurance Marketplace to apply.
Insurance Plan Types HMO, PPO and POS and Medical Savings Accounts
The three most common types of health insurance plans are Health Maintenance Organizations (HMOs), Participating Provider Options (PPOs) and Consumer Directed Health Plans (CDHPs). These can often be paired with Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), or on some grandfathered plans Archer Medical Savings Accounts (MSAs) which allows employers, employees, or self employed individuals to contribute tax free dollars towards their medical expenses.
- HMO — Health Maintenance Organization plans. These managed care plans offer the best pricing and the least flexibility. They serve up lower prices by limiting your care to the doctors, clinics and hospitals within the HMO’s network. HMOs also require you to choose a primary care physician (PCP) who coordinates your health care and provides you referrals before you are able to visit other network doctors. Go outside the network and your services won’t be covered. The California Department of Managed Care regulates the state’s HMOs.
- PPO — Preferred Provider Organization plans. Like HMOs, these plans offer networks of doctors, hospitals and clinics that are deemed “preferred providers.” Go to them and you get lower rates negotiated by the insurance company. PPOs provide more flexibility than HMOs because they allow you to seek care outside the network, which will likely cost you more in deductibles and co-pays. Unlike HMOs, PPOs don’t require you get a doctor referral before you see a specialist. Many of the plans, however, do require prior approval for certain expensive services. The California Department of Insurance regulates the state’s PPOs.
- POS — Point of Service plans. Think of these as hybrids between HMOs and PPOs. Like an HMO, you’re required to choose a primary care doctor to oversee your medical needs. But like a PPO, you’re allowed to seek care out of the network if you’re willing to pay a bit more. These plans also pay for treatment outside the network when your primary care physician refers you for such care.
- CDHP — Consumer Directed Health Plans. CDHPs often involve pairing a high deductible PPO plan with a tax-advantaged account, such as a Health Savings Account (HSA). For an individual to establish an HSA and contribute money to the account each year, he or she must be considered an HSA-eligible individual. Eligibility includes enrollment in an HSA-qualified high deductible health plan.
- FSA — Flexible Spending Account. FSAs allow you to set aside pre-tax dollars for certain health and dependent-care needs. For example, the money can be used to pay for deductibles, prescription co-pays and other treatments not covered by your insurance. A big downside for many: Whatever you don’t use by the end of your company’s benefits year, you’ll be forced to forfeit.
- HSA — Health Savings Account. HSAs are tax-preferred savings accounts available to those enrolled in high-deductible health plans. Employers and employees are allowed to contribute to them. HSAs allow you to set aside tax-free dollars to pay for routine, out-of-pocket health expenses. You also get an IRS deduction for the amount you contribute to the account each year, and you pay no federal taxes on interest earned by your HSA as long as you use the money to pay for eligible medical expenses, as defined by the IRS. Dental and vision are included. Another plus: unlike an FSA, HSA funds roll over annually and accumulate, even if an employee changes jobs.
- MSA — “Archer” Medical Savings Account. The Archer MSA is intended to be used by self-employed individuals and small businesses with fewer than 50 employees. The plan is entirely self-directed, including its initial setup and compliance with the plan thresholds. It works very closely to HSAs and have been replaced by HSAs since 2007, however some grandfathered plans may still use MSAs that have been “left open”.
Cheap Health Insurance: Are Health Care Plans Cheaper on the Marketplace?
Those looking for cheap health insurance will want to check their State’s Health Insurance Marketplace first. In many cases equivalent healthcare plans sold on the marketplace will have very similar price tags to those sold off of the marketplace. If you don’t qualify for subsidies in some cases buying insurance from a broker or directly from a health insurance company can be your best bet. If you make under 400% of FPL and could qualify for subsidies then it makes sense to purchase your insurance through the marketplace. No matter what you decide to do you can always shop around for quotes. How you obtain health insurance is your choice!
Learn more about the types of plans sold on the health insurance marketplace.
How Health Insurance Works Summary
Now that you have an idea of how health insurance works and how to buy health insurance for 2014 it’s time to fill out some applications and see what your insurance options are. No one is forcing you to buy a plan and no one is forcing you to stay with the plan you are on. Your healthcare is in your hands, keep reading more ObamaCare facts so you can understand the Affordable Care Act and health insurance.
How Health Insurance Works