Health Insurance 101: The Good, The Bad & The Misunderstood

Thinking about health insurance can often seem overwhelming. Different companies all with different policies that offer different coverage- where do you even begin? This article will discuss the different parts of health insurance policies and how they relate to you, the subscriber. We will then discuss which types of plans are most advantageous and how to choose the right plan.

Deductible, Coinsurance, Copayment and Out Of Pocket Maximum

Let’s start by identifying the different components of a health insurance policy. Typically an insurance policy will have a deductible, a coinsurance or copayment and an out of pocket maximum. Although every insurance plan is different and may not have each of these, it’s important to understand them and how they work. It’s especially useful when it comes time to choosing future health care plans.

Deductible

A deductible is the amount you owe for health care services before your health insurance plan begins to pay.  

  • For example, if Dwayne Johnson’s deductible is $2,000, he must pay the first $2000 himself.
  • After he pays his deductible, he may have to pay a coinsurance or copayment and the insurance company pays the remainder of the amount owed to the provider.
  • In some instances there is no coinsurance or copayment once the deductible is met and the insurance company pays in full.

The deductible may not apply to all health care services that you need. Your plan may not require you to pay toward your deductible for certain services like physical therapy or chiropractic care. In these cases, the insurance company will make partial or complete payments for the services you received.

Family health insurance plans often have both an individual deductible, which applies to each person individually, and a family deductible, which applies to all family members as a whole.

Coinsurance

A coinsurance is a percentage of the costs for health care services you are responsible for paying after you’ve met your deductible.

  • For example, if the health insurance plan’s allowed amount for an office visit is $100 and Dwayne has met his deductible already, his 20% co-insurance payment would end up being $20.
  • The health insurance company will then pay the rest of the allowed amount ($80). 

Coinsurance amounts can be different depending on the type of service. You may have a 10% coinsurance for chiropractic visits yet have a 20% coinsurance for exam visits. Some services may not require a coinsurance at all.

Copayment

A copayment (also referred to as a copay) is a nice, round dollar amount you pay for health care services after you’ve paid your deductible.

  • For example, Dwayne’s health insurance plan’s cost for a doctor’s visit is $100. His particular plan has a copayment charge of $15 for office visits.
  • If Dwayne has already met his deductible, then he will only be responsible for paying $15 at the time of service.
  • If he hasn’t met his deductible however, he will pay $100, the full allowable amount for the visit.

For the most part, all insurance plans have some sort of copay for one service or another. Copayment amounts can vary for different services. You may have a $30 copay for specialist visits yet have a $50 copay for lab tests. Some services may not require a copay at all.

Out Of Pocket Max 

The out of pocket maximum (OOPM) is the most you will ever have to pay during a policy period (usually a calendar year) for health care services. The total of all your deductible, coinsurance and copay payments go toward your OOPM. Once you have met this amount, the insurance company will pay 100% of all remaining covered services for that year. 

  • For example- Dwayne has a health insurance plan with a $2000 deductible, 20% coinsurance and $3000 out of pocket maximum and he needs a $10,000 surgery…
  • First, he will pay $2000 toward his deductible, leaving $8,000 remaining in medical costs. Now that he has met his deductible for the year, he will no longer have to make deductible payments.
  • Next, he will have to pay his coinsurance. His 20% coinsurance on the remaining costs ($8,000) comes to $1600.
  • His deductible, $2000, plus his coinsurance, $1600, would make his total costs for his surgery $3600.

But, wait? I thought his out of pocket maximum was $3,000 and he should never have to pay more than that? 

  • Since his out of pocket maximum is $3000, he will only have to pay $3000 for the surgery and his insurance company will pay for the rest of the costs.
  • Meeting his OOPM also means that his insurance company will pay for any covered care he gets for the rest of the plan year.

The out-of-pocket limit does not include your monthly premiums. Think of your premium like paying for a gym membership; you pay $29.99 a month to be allowed into the gym and workout. In this case, your premium is the payments you make each month to your insurance company to have healthcare coverage. 

The Truth About Patient Payments

It is important to note that when you purchase health insurance, you are under contract with your insurance company.  Any money you owe is 100% determined by your insurance company. The amount owed to a provider is never determined by the provider themselves.  

A common misconception is that when you are responsible for a payment to a healthcare provider, whether it is a copay, coinsurance or deductible, that the provider is getting paid a large sum from the insurance company on top of the amount you’re responsible for paying. When in fact, the opposite is actually true. 

Many people aren’t aware that if they don’t pay their copay, coinsurance or deductible then the doctor they received care from doesn’t get reimbursed for those services. 

Imagine this: You wake up in excruciating back pain, unable to go to work or even get out of bed. Days go by, still unable to work, and it starts to take a toll on your livelihood; physically, emotionally and financially. You start worrying that the pain won’t go away. You start worrying that you may have to miss-out on important events, like your family coming to town in the upcoming weekend.

You call your primary care doctor in a panic, get a referral for physical therapy and are lucky enough to get squeezed into the physical therapist’s schedule that same day. The therapist gives you a thorough evaluation, performs tests, and is able to give you the care and relief you’ve been longing for. You schedule a few more follow-up appointments to continue on your road to recovery, feeling like you’ve made progress after each session.

A couple of weeks go by and you’re starting to feel good as new. You have returned to work. You were able to spend quality time with your nieces and nephews when they came to visit. Your spirits are high and you feel like a functioning human being again, but suddenly you receive a bill in the mail from your PT evaluation with a $98 balance. You decide you don’t want to “throw away” $98, that the appointment definitely isn’t worth $98 and the office is crazy for thinking that way. You decide to ignore the bill and use that $98 for something “more important”.

But if you were to talk to someone a few weeks prior when you were confined to your bed and unable to work, at that very moment in time, there wouldn’t have been anything that you thought was “more important” than your health and feeling better. By not making that payment to your provider, you aren’t making your health a priority. By not making that payment, you’re taking advantage of your own self-worth.

Choosing not to pay your bill doesn’t just take advantage of yourself personally, but you’re taking advantage of the physical therapist too.

In other words, the time your therapist spent trying to discover the real root of your pain, the physical work they put into soothing your sore muscles so you could enjoy playing with your nieces and nephews, the emotional investment they put into your well-being each and every day, even on the days away from the clinic, all of that isn’t getting the proper respect or compensation it deserves. 

Next time you receive a bill or an Explanation Of Benefits from your healthcare provider and see a balance, understand that your charge makes up the majority, if not the entirety, of the payment your provider is receiving. 

The total reimbursement a provider gets = insurance company payments + patient payments. The reimbursement is a predetermined, set amount based on the services that are performed. The set price itself doesn’t change, but the amount the insurance company is responsible for paying and the amount the patient is responsible for paying can shift. 

Sometimes the insurance company is responsible for paying way less than the patient, or vice versa. In the cases where patients meet their OOPM, the insurance company is responsible for paying entirely, while the patient is not responsible for making any payments.

  • For instance, your Explanation Of Benefits may state that you owe your healthcare provider $11.55 as your coinsurance charge, while the insurance company owes them $89.45.
  • But if your Explanation Of Benefits states that you owe a $45 copay on a $70 charge and you decide not to pay, the provider is only going to receive the $25 payment from your insurance company for the care they gave you

Choosing A Plan

Now that we understand the parts that make up a health insurance plan, we will focus on how to choose the best plan for you and your family.  Although this can feel complicated, breaking it down into two main areas will help simplify the decision making process. The two areas to consider when choosing a new health insurance plan are: your total costs and the plan/network types.

Your total costs include your monthly premium payments, as well as any out-of-pocket costs, such as a deductible, coinsurance or copay. You still pay your monthly premium to your insurance company even if you don’t see a doctor or use any medical services that month, so it’s important to factor in these costs when choosing a new health insurance plan.

Beware Of Low Cost Plans; You Get What You Pay For

The old adage is true, and health insurance is no exception; you get what you pay for. When choosing a new healthcare plan, a good rule of thumb is as follows: 

Plans with ↓ lower monthly premiums generally have ↑ higher deductibles. 

Plans with ↑ higher monthly premiums usually have ↓ lower deductibles. 

The same applies to your OOPM.
Plans with ↓ lower monthly premiums typically have ↑ higher out of pocket maximums. 

Plans with ↑ higher monthly premiums usually have ↓ lower out of pocket maximums. 

Let’s dive a bit deeper into this concept. If you’re a fairly healthy person who doesn’t go to the doctor’s often and has very few medical costs, you’re going to want to pay as little as possible each month for healthcare coverage. Why pay a ton for services you’re barely going to use?  

When it does come time to get medical services, typically you’re going to have a large deductible to meet, as well as more out-of-pocket costs. Because you’re essentially “saving money” by paying less on your monthly premiums, you’ll have to spend more if and when you actually use your insurance.

Now let’s take a look at the opposite scenario; you have a chronic medical condition that requires you to go to the doctor’s fairly regularly. Since you know that you are going to be receiving a decent amount of medical care throughout the year, you decide to pay a higher monthly premium to have an insurance plan with a lower deductible. 

Choosing a plan with a higher monthly premium gives you the ability to predict your costs and allows you to fit those costs into your budget. You’re prepared to pay the monthly premium amount and know that you won’t have to pay much in order to meet your deductible, which means you shouldn’t have many, if any, surprise medical bills with large balances.

Since higher premium plans tend to have both lower deductibles and out of pocket maximums, you’ll end up meeting your out-of-pocket maximum quicker too and your insurance company will start covering your costs quicker as a result. 

Choosing Your Plan

When it comes to plan and network types, you’re looking at the type of health care services that are covered in your plan, as well as the doctors and facilities you are allowed to see. Some plan types allow you to use almost any doctor or health care facility, whereas others limit your choices or charge you more if you use providers outside of the insurance company’s network. 

The different plan types include: HMOs, PPOs, POSs and EPOs. Depending on which abbreviation you choose will dictate your freedom to choose a provider of your choice.

Health Maintenance Organizations (HMOs)

A type of health insurance plan that usually limits your coverage to receiving care from doctors who work or are contracted with the HMO network. This plan generally doesn’t cover out-of-network services, except in the case of an emergency. An HMO also requires you to choose a primary care physician to be eligible for coverage. The primary care physician helps ‘coordinate your care,’ meaning they must refer you first before seeing a specialist.

Preferred Provider Organizations (PPOs)

A type of health insurance plan that contracts with medical providers to create a network of ‘participating providers.’ If you see a doctor that is considered a ‘participating provider,’ you will pay less than you would for a doctor who isn’t. You can still see doctors outside of that plan’s network, but you will have to pay more for those services.

Point Of Services (POSs)

A type of health insurance plan where you pay less if you use doctors, hospitals and other health care providers that belong to the plan’s network. Think of a POS plan as a hybrid between an HMO and PPO. You actually are choosing whether you want to use HMO or PPO services each time you go to the doctor. Like an HMO plan, you have to choose one of the ‘participating providers’ as a primary care physician, but still can pay an additional cost to see non-participating providers like you would with a PPO plan. POS plans also require you to get a referral from your primary care physician if you need to see a specialist for any reason.

Exclusive Provider Organizations (EPOs)

A managed care plan where services are covered only if you go to doctors, specialists or hospitals in the plan’s network, except in an emergency. Unlike an HMO, you don’t need to name a primary care physician or get a referral to see a specialist, as long as you choose a ‘participating provider.’

When a provider is considered “in network” for a plan, it means that the provider agreed to provide benefits or services to the plan’s members at an agreed upon, discounted rate.

If you use an out-of-network provider, you may have to pay the full cost of the benefits and services you get from that provider, regardless of which plan type you have, except for emergency services. If you get emergency services from an out-of-network provider, those services are covered by a Marketplace plan as if you used an in-network provider. However, providers may bill you for some additional costs associated with the emergency services you get.

Make A List

When choosing health insurance plans, start by making a list of all the health care providers you see. Remember that “providers” include health care professionals like doctors, psychologists or physical therapists, as well as any health care facilities like hospitals, urgent care clinics or pharmacies. 

Insurance companies may have different networks for different plan types, so make sure you’re searching the provider network of each specific plan you’re looking into. For instance, your primary care physician may be in-network with the Blue Cross Blue Shield PPO plan you’re looking into, but out-of-network for Blue Cross’s HMO plan. The best way to check if your providers are in network with each plan is to call the health insurance company’s customer service phone number.

Supplemental & Replacement Coverage

Some people decide to get additional coverage in the form of a secondary health insurance plan. Secondary insurance, also referred to as supplemental insurance, is coverage that fills in gaps of the primary health insurance plan, which can include copayments, coinsurances and deductibles. 

Secondary health insurance plans are meant to complement, or go along with, primary medical benefits, not replace them. 

  • For example: Dwayne Johnson’s primary insurance is Aetna, which only covers 80% of his medical expenses.
  • Dwayne decided to purchase a secondary insurance plan through Blue Cross Blue Shield, which picks up the remaining 20% that his Aetna policy does not cover.
  • Although Dwayne has to pay a monthly premium in order to have secondary coverage from Blue Cross Blue Shield, the cost of that premium tends to be substantially lower than the out-of-pocket medical costs he would have to pay with Aetna coverage alone. 

Medicare Options

When it comes to additional coverage, those who qualify for Medicare health insurance have a few different options. A person can purchase a secondary insurance plan, often referred to in this case as ‘Medigap’, that covers some or all of the expenses Medicare does not.

Another option for those who qualify for Medicare coverage is a replacement insurance plan. Medicare replacement plans are just that- replacement plans for standard Medicare health insurance. A person can purchase a replacement plan through a private insurance company, such as Blue Cross Blue Shield, that typically covers everything that traditional Medicare would, but also covers additional services as well.

These replacement plans, referred to as ‘Medicare Advantage Plans’, are similar to private health insurance plans in both cost and coverage. Advantage Plans can have deductible payments, coinsurance and copayments depending on the service. Some plans offer out-of-network benefits, whereas some only cover healthcare professionals that are in their network.

These plans were initially intended to reduce costs, enhance the quality of care given and improve patient choices, but major policy changes over the years have strayed from those original goals. Many replacement plans can actually cost more, through premiums and out-of-pocket costs, than costs with traditional Medicare alone would. Advantage plans also have their own provider networks that may restrict the doctors you are able to go to.

  • For example, Dwayne is enrolled with Medicare for his health insurance but decides to purchase a Medicare replacement plan through Blue Cross Blue Shield. 
  • He pays less for his Blue Cross Blue Shield Medicare Advantage plan than he would for Medicare as his primary insurance and Blue Cross as his secondary insurance combined, but he is now limited to seeing doctors within his replacement plan’s network. 
  • The family doctor he has been seeing for over 20 years is not in-network with his replacement plan, leaving Dwayne to find a different doctor for him and his family.

It’s extremely beneficial to understand the differences between supplemental and replacement plans. Often times people are under the impression that they have supplemental health insurance when they actually have a replacement plan. 

It’s especially important to understand and disclose your exact plan type when scheduling appointments with a healthcare provider, as each plan has different coverage, different costs and different limitations. Indicating that you have Medicare and Blue Cross Blue Shield plans is incredibly different than having a Blue Cross Blue Shield Medicare Advantage plan.

  • For example: Dwayne had surgery to repair a knee injury and needs physical therapy. When scheduling his first visit, Dwayne states that he has Medicare and Blue Cross Blue Shield plans. He schedules all of his appointments ahead of time for an entire plan of care. He is also told that it is very likely that he has met his Medicare deductible for the year since he has already paid for his surgery, therefore it’s expected that he shouldn’t be responsible for any large payments, if any at all. 
  • After the physical therapy clinic looks into his policies, they discover that Dwayne does not have separate Medicare and Blue Cross Blue Shield plans, rather he has a Blue Cross Blue Shield Medicare Advantage plan; a replacement plan. This plan requires pre-authorization in order to even begin physical therapy treatment, a process that could take up to 14 business days to be approved, and is limited in number of visits he’s allowed to have. On top of that, his plan has a $40 copayment for each physical therapy session. Dwayne now has to reschedule and reduce the number of visits he has already scheduled, as well factor some unexpected costs into his budget.

Final Thoughts

Although it may seem complex, understanding the ins and outs of health insurance coverage will be extremely beneficial. You may even start noticing how some insurance company’s advertisements can be quite misleading to those who aren’t as familiar with health insurance. 

Popular insurance commercials often claim that their plans “have no copays, no deductibles” or things along that same line. These plans may sound appealing, but the money being “saved” has to be balanced out somewhere- whether it’s with charging you high monthly premium payments or significantly limiting the doctors and services that are covered. 

A good rule of thumb is if it seems too good to be true, it probably is. Look further into the eligibility and benefits of the plan to see just how “perfect” the plan really is.

Using your newly acquired knowledge about health insurance plans will allow you to better decide whether those plans are right for you and your family.

Borja PT’s Top Recommended Insurance Picks For 2020

When it comes to physical therapy services, insurance companies such as…

  • Meridian
  • Blue Cross Complete
  • McLaren 
  • United Healthcare Community

generally have State Marketplace plans with physical therapy coverage at little or no cost to the subscriber. 

Likewise, 

  • Blue Cross Blue Shield
  • Aetna
  • Medicare 
  • Cigna

tend to have private health care plans with physical therapy coverage at little or no cost to the subscriber as well.

**All statements made by Borja Physical Therapy are generalized statements regarding most health insurance plans and in no way is a guarantee of benefits or eligibility. All statements are based on benefits that are considered covered healthcare services.
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Jaime Curl

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