Americans who fret over high health insurance costs, especially regarding the policies they choose to cover their medical needs, may have an underlying issue that’s preventing them from getting a good health care insurance deal.
In short, their lack of knowledge about basic health care terms may cause many medical consumers to pay more than they need for health care insurance.
According to Rice University’s Baker Institute for Public Policy and the Episcopal Health Foundation, 25 percent of Texas residents say they lack confidence in understanding some of the most basic terminology about health insurance plans. According to study analysts, uninsured, low-income and Hispanic Texans were least likely to understand even bedrock basic health-plan terms like “premium,” “copayment” and “provider network.” Moderately more complex terms, like co-insurance” and “maximum out of pocket expenses,” were the least understood terms, as expressed by the Baker study participants (33 percent).
“Health insurance plans are complex products, with many interrelated features,” the report states. “Consumers needed a basic understanding of the features of the plans they were considering to make the best decisions.”
Obviously, the Affordable Care Act has been a game-changer for health care consumers, especially brand-new ones.
See also: Obamacare in 2016: What you need to know
“One of the main takeaways from the first open enrollment period of the Affordable Care Act's exchanges that ended two years ago was that millions of people in the United States were buying health insurance, but had no idea what most of the terms meant,” explains Adam Beck, a health care specialist with the American College of Financial Services, in Bryn Mawr, Pennsylvania. “As a result, you have a lot of people who are technically insured — and may even have low or no premiums — but really can't afford to see a doctor or have a procedure done, because of the deductible.”
It’s tough to say exactly how much money consumers are squandering by failing to understand common terms like “deductibles” and “premiums.” But health care experts say the amount can be thousands of dollars and more, and climbs upward the more sophisticated the terminology challenging medical consumers.
What are the health insurance terms Americans really need to know about — and why? Here’s what industry experts had to say.
1. 'Out-of-pocket maximum' tops health insurance terms
“Probably the No. 1 term that people ignore at their peril is the term “Out of Pocket Maximum”, otherwise known as the “OOP Max,” notes John Hansen, a health insurance broker for KaiserQuotes.com in Santa Rosa, California. “In many cases, the out of pocket maximum is more important than the deductible. The out of pocket minimum is the most money you would pay out of your pocket in one calendar year. When you hit the out of pocket maximum, you’re done paying for the year (not including your monthly premiums).”
But if the unthinkable happens and you have to have a $100,000 surgery, consumers need to know how much they are going to have to pay themselves, and how much will the health insurance carrier pick up. “If your out of pocket maximum is $6,500 (the current out of pocket maximum on the ACA’s Bronze 60 plan), expect a bill for $6,500, while the carrier would pay the remaining $93,750,” Hansen says. “Could you handle taking a hit for $6,250 in one year? If not, then you might want to get a plan with a lower out of pocket maximum.”
2. 'Spousal carve out'
For Michael Kuhn, president of GLG America, a workforce benefits specialist in Fishers, Indiana, the issue is a personal one. “My family is a heavy user of our medical plan,” he says. “My son has Type One Diabetes, and my wife has some chronic medical conditions.”
Kuhn cites "spousal carve out" as a particularly important term for health consumers to know. “That’s when your employer won't cover your spouse if they have coverage at their employer. The problem here is that it forces you to meet two different deductibles,” Kuhn says.
3. 'Tobacco surcharge'
If you smoke or use tobacco, you could find that you'll have to pay more than someone who doesn't, says Kuhn. “This could be a significant increase depending on your employer.”
4. 'In network/Out of network'
Some high-deductible health insurance plans sometimes don't pay anything for providers out of the network, Kuhn notes. “But more importantly, out of network providers might not count toward your deductible either.
5. 'HMO vs. PPO'
Consumers need to know the difference between Health Maintenance Organizations and Preferred Provider Organizations. “It's important to know whether you have to choose a primary care physician and see him or her before seeing a specialist, or if you have more freedom to see providers of your choice,” notes the American College’s Beck. Add “co-pay” to the mix, too, Beck advises. “That’s a fixed amount (for example, $20) you pay for medical care (such as an office visit, therapy session or prescription), usually at the time you receive the service or buy the drug.”
These aren’t the only terms health care consumer should know before choosing a ACA-based health care plan, but they’re at the top of the list.
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For 2015, the penalty calculation is the greater of a) 2% of your household income that is above the tax return filing threshold for your filing status, or b) your family's flat dollar amount which is $325 per adult and $162.50 per child, limited to a family maximum of $975. The maximum penalty for an individual is $2,595. The maximum penalty for a family of five or more is $12,974.
For 2016, the penalty calculation is the greater of a) 2.5% of your household income that is above the tax return filing threshold for your filing status, or b) your family's flat dollar amount which is $695 per adult and $347.50 per child, limited to a family maximum of $2,085. The maximum penalties for individuals and families in 2016 are indexed for an estimated premium inflation rate of 6%.