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But choosing health insurance can be a dizzying adventure. Health insurance has many moving parts, and it can be unfocused at first glance. And each has a financial impact on the buyer.
“It’s confusing and people have no idea how much they potentially have to pay,” he said. carolyn mcclanahanis a certified financial planner and founder of Life Planning Partners based in Jacksonville, Florida. She is also a doctor.
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Making mistakes can be costly. A consumer is usually bound by his health insurance for one year, with limited exceptions.
Here’s a guide to the main cost components of health insurance and how they affect your bill.
A premium is the amount you pay to your insurance company each month to enroll in health insurance.
This is probably the most transparent and understandable cost element in health insurance, comparable to sticker pricing.
The average individual premium in 2022 will be $7,911 per year or $659 per month. report Employer Compensation from the Kaiser Family Foundation, a non-profit organization. Family insurance for $22,463 annually ($1,872 monthly).
However, employers often pay a portion of these premiums to workers, which significantly reduces costs. The average worker is paying $1,327 a year ($111 a month) in personal compensation and her $6,106 ($509 a month) in family compensation in 2022, after accounting for the employer’s share.
According to KFF, monthly payments can be higher or lower depending on the type of plan you choose, the size of your employer, your geography, and other factors.
Low premiums do not necessarily mean high value. Depending on your plans, seeing a doctor later or paying for surgery could result in a large bill later on.
Karen Politz, co-director of KFF’s program on patient and consumer protection, said, “When buying health insurance, people naturally shop on price, as they do with most products.
“If you’re looking to buy tennis shoes or rice, you know what you’re getting,” she said. “But health insurance isn’t a commodity, so people shop on price alone. You shouldn’t.
“Plans can be quite different,” she added.
Also, many workers are required to pay a co-payment ($1 fee) when they see a doctor. “Copayment” is a form of sharing costs with a health insurance company.
According to the KFF, the average patient pays $27 for each visit to a primary care doctor and $44 for a visit to a specialist.
Patients may have additional cost contributions such as coinsurance, which is a percentage of the medical costs that the consumer shares with the insurance company. This usually starts after you pay your annual deductible (the concept is explained in more detail below).
According to KFF data, the average co-insurance rate is 19% for primary care services and 20% for specialty care services. The insurance company will pay the remaining 81% and 80% respectively.
As an example, if a professional service costs $1,000, the average patient pays 20% (or $200) and the insurance company pays the rest.
Co-payments and co-insurance vary by service, with visits to clinics, hospitalizations, or prescription drugs classified separately, according to the KFF. Rates and coverage may also differ for in-network and out-of-network providers.
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Deductibles are another common form of cost sharing.
This is the annual amount consumers must pay out of pocket before health insurance companies begin paying for services.
According to the KFF, 88% of workers covered by health insurance will be deductible in 2022. The average person with single coverage has a deductible of $1,763.
Deductibles mesh with other forms of cost sharing.
This is an example based on hospital costs of $1,000. A patient with a $500 deductible will co-pay her first $500. This patient she also has 20% co-insurance, totaling $100 (or her 20% of the remaining $500 tab). This person will co-pay a total of $600 for the visit to this hospital.
Your medical insurance policy may have multiple deductibles. For example, one for general medical expenses and another for pharmacy benefits.
The family plan also allows you to assess your deductible in two ways. One way is to combine the total annual out-of-pocket costs for all family members and/or apply individual annual deductibles to each family member before the plan covers that member’s expenses.
Average deductibles vary greatly by plan type. $1,322 for the Preferred Provider Organization (PPO) plan. $1,451 for Health Maintenance Organization (HMO) plans. $1,907 for point-of-service (POS) plans. $2,539 for high deductible health insurance, according to KFF single coverage data. (Details on plan types are detailed below.)
Most people also have a “out-of-pocket limit”.
This is the cap on the total annual costs a consumer pays, including co-payments, co-insurance and deductibles.
“Insurers cannot ask doctors or pharmacies to co-pay or ask for additional deductibles,” says Pollitz. “That’s it. You gave me a pound of meat.”
According to the KFF, more than 99% of single-insured workers are on the plan with the highest out-of-pocket expense.
KFF data shows that 8% of single-insured workers have out-of-pocket costs of less than $2,000, while 26% have more than $6,000.
Out-of-pocket limits for health insurance plans purchased through the Affordable Care Act marketplace cannot exceed $9,100 for individuals and $18,200 for families in 2023.
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Health insurers treat services and costs differently based on their ‘network’.
“In-network” refers to doctors and other healthcare providers who are part of the preferred network of the insurer. Insurers sign contracts and negotiate prices with providers in their network. This is not the case for “out-of-network” providers.
Here’s why this is important: Deductibles and out-of-pocket limits are much higher when consumers seek care outside the network of insurance companies. Generally, it will be about double the amount in the network.
There may be no cap on the annual cost of out-of-network care.
“Health insurance is all about the network,” says Pollitz.
“Your financial liability for leaving the network can really be very dramatic,” she added. “It can expose you to serious medical costs.”
Some categories of plans do not allow out-of-network services, with limited exceptions.
For example, HMO plans are one of the cheapest types of insurance, according to to Etna. Among the tradeoffs: This plan requires consumers to choose a doctor in the network and requires a referral from a primary care physician before seeing a specialist.
Similarly, EPO plans also require in-network services for insurance coverage, but generally have more options than HMOs.
POS plans require a referral for a professional visit, but allow some out-of-network coverage.PPO plans typically cost more, but offer more flexibility and no referrals out-of-network and expert visits are possible.
“The cheaper plans have more fragmented networks,” McClanahan said. “If you don’t like your doctor, you won’t get good choices and you may have to get out of the network.”
There is a crossover between high deductible health insurance plans and other plan types. The former generally has deductibles of $1,000 and his $2,000 or more for personal and family coverage, respectively, and is paired with a health savings account. Tax incentives for consumers to save for future medical expenses.
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Budget is one of the most important considerations. Winnie SunCo-Founder and Managing Director of Sun Group Wealth Partners in Irvine, CA, and a member of CNBC’s Advisory Council.
For example, if you need health care, do you struggle to pay $1,000 for medical bills? If so, health insurance with higher monthly premiums and lower deductibles might be your best bet, says The Sun. said.
Similarly, older Americans and those who need more health care each year, or who anticipate needing costly procedures in the coming year, have lower cost-sharing requirements despite higher monthly premiums. It is better to choose a plan.
In general, healthy people who don’t hit their annual medical bills cap may find it cheaper overall to join a plan with a higher deductible with a medical savings account, McClanahan said. increase.
Advisors say consumers who subscribe to plans with higher deductibles will need to use their monthly premium savings to fund the HSA.
Referring to prepaid premiums and postpaid cost sharing, McClanahan said, “Understand the initial amount and potential final amount when choosing insurance.”
According to Pollitz, all health plans have a “benefits and coverage summary,” which shows key cost-sharing information and plan details uniformly across all health plans.
“I recommend spending some time at SBC,” she said. “Don’t wait an hour before the deadline to see it. The stakes are high.”
Additionally, if you currently use your favorite doctor or provider network, if you switch, make sure those providers are covered by your new insurance plan. You can browse our online directory or call your doctor or provider and ask if they accept your new insurance.
The same is true for prescription drugs. Mr Sun said: