Pennies on the nickel?? Insight into how plans handle the smaller bills.
Now small bills basically refers to everything up to your maximum-out-of-pocket (see Section 3 - Big Bills). There are different ways each plan handles these expenses so lets explore them and more importantly...their costs to you.
Up to your maximum, each plan handles smaller bills in one of three ways. By small bills, we mean everything from your doctor visit charge to minor surgery...essentially what falls below your maximum (because it goes 100% after that anyway!!). Let's first understand what these terms are, and then really understand how much it costs to have the bells and whistles.
Deductibles, Copays, Co-insurance.
A deductible is an amount that you will pay 100% of before the plan starts to pay. Think of if as a pool of money. Once you have spent your pool of money out of your pocket, the insurance then starts to kick in. This amount is usually in a calendar year, January-December. Sometimes there are separate deductibles for specific care such as maternity. Now remember, if you are in-network i.e. you are Unicare and the doctor is a Unicare doctor, then you will get 30-60% off because of the negotiated rates. Let's look at an example...
Doctor visit is $100. Because you are Unicare PPO and doctor is Unicare PPO, then this charge may drop to $60. You pay this $60 and it applies to your deductible.
This negotiated rate is a great benefit even before you have met your total deductible. Now out in the market today, they primarily have what's called a high deductible plan (from around $1,000 to $3,000) which is for the person who is really worried about the big what-if and wants to keep their monthly premiums down. A great example of this is the HSA plan which has special tax advantages for the self-employed and small group.
A Copay is simply an amount you pay for a given service. For example, a $40 copay usually means you will pay $40 for the doctor consultation. Keep in mind that additional services, i.e. labs, x-rays, etc...will have additional costs. Sometimes there are copays on specific services. For example, ambulance or emergency room visit might have a copay.
Co-insurance refers to a percentage you will pick up for services. For example, a 30% plan means that you will pay 30% (insurance will pay 70%) of the negotiated rate.
For example on a 30% plan:
minor surgery $1,000
negotiated rate $ 700
30% coinsurance $ 210 (30% of $700)
In this case, in-network for a covered benefit, you would pay $210.
These are essentially the three ways an insurance plan handles the smaller bills.
deductible You pay 100% up to a certain amount
co-insurance You pay a percentage up to a certain amount
copay You pay a fixed amount for a certain service
That "certain amount" above is typically your maximum out of pocket.
Now that we know how a plan handles the small bills, let's understand what it will costs us.
Obviously the co-insurance in nice because you have "first dollar" coverage meaning the insurance company will help pay with your first bill. That being said...you don't think they will do it for free do you? This is critical. Let's look at an example.
35 yr old, Harris County, good health
$2,250 Deductible PPO plan $85/month
30% PPO plan $219/month
Now with the first plan, you have to meet a $2,250 deductible...translation, this is mainly for the big bill. You'll get negotiated rates but all the small stuff will fall on your shoulders. Now the other plan will start paying 70% from your first bill...very nice right?? But wait a minute...we are paying an extra $134/month for that first bill coverage. They both handle the big bill about the same (max is about the same). $134/month is $1,608 per year!! That almost makes up for the deductible amount in one year!!
Paying a guaranteed $1,608 a year to save a potential $2,250 per year is not good insurance and you would need a lot of small bills to make it worth $1,608. Remember, you want to pay pennies on the dollar...not pennies on the nickel. Paying $85/month to protect against a $20,000 surgery is smart insurance...pennies on the dollar.
Now for those people that absolutely want first-dollar coverage...great...you can have it. Just keep in mind the above example. Also, over the last three years health insurance has been hit by significant rate increases. Guess where they typically hit hardest...Co-insurance and HMO's.
Now that we feel pretty good about the doctors, big bill and small bill coverage let's look at prescriptions. With brand name prices increasing 20% a year recently, it is important to see how a plan handles this....Next Page - RX
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