A Moving Target
The ACA insurance marketplace is unsettled at the moment, but that doesn’t mean you should postpone getting insurance. Because coverage details vary state by state and based on your situation, it’s best to check out healthcare.gov for more information.
How Health Insurance Works
Employers pay an annual premium to an insurance provider offering a specific plan or group of plans. In exchange, the provider pays the healthcare costs for people insured under the plans.
Most employers pay a percentage of the premium and you pay the balance, which is deducted from your paycheck. The good news is that this money is pre-tax dollars, so it reduces what you owe on taxes. Employers typically pay a larger share than employees do. But if you can add your partner to your plan, you are likely to be responsible for more, or all, of the premium for him or her.
The majority of health insurance plans have a deductible. That’s the amount you have to pay yourself, out-of-pocket (OOP), before your plan will begin to pay its share of your healthcare costs. The premiums you pay to be covered don’t count toward the deductible.
In most plans, preventive services, such as cancer screenings and immunizations, are covered without cost to you, but they usually don’t count toward your deductible. Neither do services that your plan doesn’t cover, such as things like cosmetic surgery.
If you leave a job where you’ve had health insurance, you may be able to continue that coverage until you’re eligible for a new employer’s plan. It’s very expensive—typically you pay 102% of your employer’s cost for the insurance. And it’s not always handled effectively. But this option, called COBRA, is definitely better than not having insurance if you need medical care before you’re covered under a new employer’s plan.
Types of Coverage
One of the big issues with health insurance, in addition to being expensive, is that it’s complicated. There are multiple providers, each with several types of plans, each working differently from the others. That matters because you’re likely to find yourself in a position of having to choose among alternatives. To end up with a plan that works for you means you have to understand the fine print.
Managed care plans have a list of participating healthcare providers. The plan negotiates fees with its providers, and your cost for each visit to a provider is set by your employer’s plan. It could be a copay, which is a dollar amount, like $25, or coinsurance, which is a percentage of the total, like 10%. But if you use a provider who isn’t on the plan’s list, you’ll be responsible for a much higher portion of the cost and maybe even the whole amount.
Fee-for-service plans allow you to use any provider you wish. Your plan will pay a percentage, often 70% or 80%, of the cost it approves for a particular service. However, the cost it approves may be less, sometimes much less, than the actual cost of the service. So you could end up owing your coinsurance plus the amount that wasn’t approved.
High deductible health plans (HDHPs) are managed care plans with substantially higher deductibles than other plans but also lower premiums, sometimes much lower. The federal government sets the minimum allowable deductible each year and also the maximum amount you can be required to pay for covered services from your plan’s list of preferred providers. If you reach that maximum, the plan covers the full cost of any additional qualifying expenses.