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Whether you’re about to be kicked off your parent’s health insurance plan or have been openly enrolled for years, navigating health insurance jargon can be daunting.
Plan coverage information is not always transparent. Neither is there one right answer, as the best plan for you may depend on your health status and needs, said Dr. Renuka Tipirneni, assistant professor of internal medicine at the University of Michigan School of Medicine.
“It’s confusing to me, and I’m a person who focuses on the health insurance policy,” Tipirneni said. “But I also got a surprise bill. So I think it’s really important to be informed and then realize that we’re all going to make these honest and easy mistakes, and then reach out for help when that happens.”
Not understanding your health insurance can have consequences, including the possibility of facing unexpected or overwhelming costs, Tipirneni said. You might even avoid worrying if you’re not sure how much you’ll have to pay.
Here are some common mysteries regarding health insurance and what you need to know to get the care you need.
Why can’t you enroll in health insurance whenever you want?
“Insurance companies don’t want people to sign up when they get sick,” said John Holahan, a fellow at the Urban Institute’s Center for Health Policy in Washington, DC.
“Open enrollment is to protect the insurance company from what’s called adverse selection — in other words, people choosing insurance right when they need care, such as buying homeowners insurance when your house burns down Holahan said.
Open enrollment periods typically take place between fall and early winter, Tipirneni said. You can also usually sign up during certain life events, such as losing insurance, moving, getting married, having a baby, adopting a child, or if your household income falls below a certain amount.
If your income is low enough to qualify for Medicaid — insurance funded by the United States government — you can enroll at any time, Tipirneni said.
Some people are confused by the difference between premiums and claims. Premiums are the monthly fee you have to pay to have health insurance at all—even if you never take advantage of your plan by getting medical care or medication, Tipirneni said.
The claim is the bill that the health care provider sends to the insurance company so that the company covers its portion of the health care services, Tipirneni said. Sometimes the provider will require you to submit the claim to the insurance company.
A deductible may sound like a discount, but it’s not. It’s the amount you have to pay out-of-pocket for health care before your insurance coverage kicks in, Tipirneni said.
Deductibles usually start in January. If you have a deductible of $1,000 for the year, you will have to pay the full cost of any medical care until you reach $1,000. A doctor’s visit may not cost that much, so it may take months to reach a deductible. If you rarely see doctors, you may not reach the deductible before the end of the year.
High-deductible plans are popular because they are often paired with low monthly premiums. They can look very attractive as they appear to have the lowest initial costs, but you may in fact, it ends up paying more, Tipirneni said. For example, if you have a $3,000 deductible plan but don’t meet your deductible by the end of the year, you will have paid the full cost of any health care you received, plus monthly premiums.
“Sometimes that will result in more total out-of-pocket costs for you than it would have if you had gotten a slightly higher premium and a lower deductible,” Tipirneni said.
If you’re young and healthy and don’t have any health problems or prescriptions, a higher-deductible plan may make sense for you, Tipirneni said. If you have one or more health problems, expect frequent doctor visits, or have prescribed medications, a plan with a lower deductible may be better.
There’s no universal rule for how many expected drugs and appointments would warrant getting a plan with a lower deductible — especially since healthy people can have unexpected health needs, like car accidents or sports injuries.
“All you can do is make a best guess about how much health care you’re going to use in the next year,” Tipirneni said.
Once you’ve met your deductible, you’ll typically pay a copay at each doctor’s visit—a flat fee determined by the type of insurance you buy. The rest of the bill is usually covered by insurance.
Different services, such as doctor visits and therapy appointments, can have different co-pays because insurance plans cover different parts of each service, Tipirneni said.
Out-of-pocket costs are a general term for everything you pay besides the premium, Tipirneni said — so copays, deductibles, coinsurance and maybe more.
Some insurance companies may also require you to pay coinsurance, a percentage of the bill you pay even after you’ve covered your deductible, while the insurer handles the rest.
Some policies have out-of-pocket maximums that limit the total costs you incur, Holahan said.
Knowing which services are covered by a plan can be confusing because it can change every year, Tipirneni said.
All plans have a list of covered benefits that are included in a handbook or other information provided at enrollment, Tipirneni said.
Sometimes plans don’t cover certain conditions or problems you think they do, Holahan said. For example, the plan may include a hearing screening but not hearing aids.
“If you’re not sure, call your health insurance card number to talk to your health plan and ask them how much it will be or if it’s covered,” Tipirneni said.
An in-network health care provider has predetermined agreements with your insurance company about what they can charge for their services, while an out-of-network provider has no such contract.
“If there are doctors and hospitals that are really important to you, then you might want to choose the plan that has those in-network,” Holahan said.
Online directories of providers or networks published by insurance companies can help you see if your current doctor is already in network.
If you have an important prescription drug, check your plan’s drug formulary, which is the list of drugs partially or fully covered by insurance. The extent to which a plan covers certain services or drugs can change, so check that every year, Tipirneni said.
Insurance plans may cover out-of-network providers to some extent, but usually much less than what they cover for in-network providers, she added.
This can be a problem if you have to see a specialist or are away from home. If you have time before you travel, ask your health insurance company if there are in-network providers or hospitals in your destination so you can pay less for any unexpected care, Tipirneni said.
If you get an ‘explanation of benefits’ statement and you’re not sure what it is, relax – it’s not a bill. This is just an overview of which countries pay what.
If you do end up with a surprise bill—for example, surgery involving multiple providers, some of whom you didn’t know were out-of-network—Tipirneni recommends appealing that bill to your insurance company or the hospital.
“Usually with these conversations, you can negotiate the amount down,” she said. “There’s been some legislation passed — and I think there’s more to come, hopefully — to try to make that happen less often and make it more transparent so that people can make those decisions about where to go to provide care in a more informed way.”
If you need more help, Health Insurance Navigators can help you determine which plan is right for you. Health insurance agents can do the same, but they may have an incentive to offer some plans over others, Tipirneni said.
If you’re enrolling in government health insurance, you can talk to staff who can help you find out if you’re eligible. The Affordable Care Act website has search features for getting local help.
If you’re enrolling in work-provided health insurance, a human resources officer may be able to explain the plans or give you materials, Holahan said.
“The more you can try to do your homework upfront when choosing a plan, and if you need care, the better informed and attuned you’ll be to hopefully not pay more than you have to.” Tipirneni said.