Beginner’s Guide to Understanding Health Insurance Plans
An example 2024 health insurance plan from Oscar Insurance Company of Florida via healthcare.gov
In the United States, Health insurance can often feel overwhelming with its use of complex terminology paired with what seems to be random numbers. Understanding key terms can help you navigate your policy and make confident decisions about your healthcare coverage for you and your family. Let's break down some of the common health insurance plans into six sections to provide you with a clearer understanding of what they mean and how they impact your coverage. I will be using a sample summary view of a 2024 health plan from healthcare.gov to highlight and explain what the different areas marked in red mean.
Table of Contents:
Premium
Deductible
Out-of-Pocket Maximum
Insurance Benefits
Plan Details
Doctors/Prescription Drug Check
Conclusion
Premium
A premium is the amount of money you pay an insurance company in exchange for health coverage. This fee is typically paid every month, regardless of whether or not you require medical services during that time. An easy way is to think of this as a subscription service like Netflix, you have to pay monthly for it to be active.
From the image above, the premium is $458.52. If this was your plan, you would pay Oscar Insurance $458.52 per month to keep your insurance active. If you fail to pay the amount, you will enter a grace period of usually 90 days (days can vary, contact your insurance for more info). If you still haven’t made payments to keep your plan active, your insurance company can terminate your coverage.
Tips from us to avoid payment-related issues:
Be realistic with your budget. Can you afford this plan without compromising on other life necessities?
Set up auto-payments with your insurance. Most companies have mobile/web apps that make this simple to enroll in.
Set notifications on your phone or email, your insurance company will usually send warnings if payment fails or payments are getting past due.
2. Deductible
Simply put, a health insurance deductible refers to the amount of money an individual must pay out of pocket for covered healthcare services before your insurance plan starts to contribute. All the payments you make towards health insurance expenses add to this deductible total so eventually your insurance will start “kicking in”. This plan has an amazing benefit because of the $0 deductible they offer. This means insurance will start contributing immediately towards the bill as described in your plan.
Example: Tom received a medical bill for $1,000 from the emergency room, however since he has this plan as shown above; his insurance will pay their portion immediately. If you look at the “emergency room” section of this plan you will see it says 50%, which means Tom pays 50% and the insurance pays 50%. Tom is left to pay a total of $500.
If Tom had another plan where the deductible was $1,000 and he received the same bill with no other medical expenses during that year, he would be responsible for paying the full $1,000.
3. Out-of-pocket maximum
The out-of-pocket maximum is the most you have to pay for covered services in a policy period (usually one year) before your insurance starts to pay 100% of the allowed amount. Deductibles, copayments, and co-insurance payments go toward the maximum limit. Once you reach this limit, your insurance will cover all remaining eligible expenses, giving you financial protection and peace of mind. Let’s see how this would work using the plan above with an out-of-pocket maximum of $9,100.
Example: Tom spent $1,000 on copayments and $2,000 on co-insurance. Before the plan year ends, Tom receives a new co-insurance medical bill for $10,000. Tom will only have to pay $6,100 from that bill because Tom already paid $3,000 which completes his max out-of-pocket of $9,100 for the year.
Here is another way to view it:
Total Payments of $1,000 copayment + $2,000 co-insurance = $3,000 out of $9,100 out of pocket maximum
New medical bill owed by Tom is $10,000 - $3,000 (what he already paid that year) = $6,100 due.
4. Insurance Benefits (Highlights)
Once the deductible is met, these are your portion of the cost of medical services until you reach your out-of-pocket maximum. This is only a quick reference, full details are found under Plan Details. From this snapshot of the plan, you can quickly notice some key features of this plan.
If you visit your primary care, there is no visit charge.
If you go to a specialist, you will pay $100 for the visit fee.
If you have to go to the emergency room, you will pay 50% of the insurance-approved medical bill.
5. Plan Details
This link has the full details on what your insurance covers and what you must cover on valid medical expenses. Click to open the PDF and read through it so you can fully understand your plan. Everyone has different medical needs when it comes to coverage so these details are important to understand what is covered and what is not.
Example: Tom needs an x-ray and blood work at his primary care. Visiting cost for primary care is free but once you open your plan details, you see an X-Ray copayment of $75. Blood work costs $20.
Tom’s total once he leaves the doctor's office will be $0 (visit cost) + $75 (x-ray) + $20 (blood work) = $95
6. Doctors/Prescription Drug Check
This section allows you to input your doctor's info and the name of the prescription drugs you use to see if the insurance plan covers it. An important thing to know about insurance is the place you seek treatment as well as the type of prescriptions you use must be approved by the insurance company otherwise you will end up paying full price.
By using this section, you can see if your preferred doctor is covered within this plan. You can also make sure any current and ongoing medicine will be covered, this tool is a quick and easy way to check without having to make a phone call to ask. If you have no doctor preference and are not on any medicine, it is still good to know if there are doctors close by your area under your health insurance coverage.
7. Conclusion
We hope this quick guide was helpful and a way to show you clear information about health insurance plans so you can make the best choice for you and your family.
At Mutual Wealth Insurance, we believe everyone should know their plan details and should be well informed about their coverage. If you would like us to go over your current plan or if you just need help navigating the health insurance world please feel free to contact us anytime.
