How to Buy Health Insurance, or Thoughts on Obamacare Pt 1

I don’t think it’s a secret that I have been in love with B. Obama since day One. His moderate approach to politics is my cup of tea and I am in love with every piece of legislation he has passed.

Especially Obamacare.

I know that’s supposed to be the derogatory reference Republicans made to it, but I’m on a mission that in a few decades when universal health care is finally a thing that we call it Obamacare.

Anywho, the law was upheld for the most part on Thursday. The only part that was fiddled with was a portion about Medicaid. I’m still reading through all the reports and stuff from my Financial Planning associations, but I want to give you a little bit of insight so you’re not totally sidelined by this thing.

First, I think we should go over some terminology today and then delve deeper into the law on Wednesday. Sound good? Ok, let’s do it.

When you buy health insurance a lot of abbreviations and terms are thrown at you as if you’re supposed to know what they mean. For example, do you know the difference between a PPO and an HMO? Oh yeah, if you’ve watched Pay It Forward you probably think you should avoid HMOs. That they’re evil and deny you for everything and are miserable plans that involve a lot of phone time.

In reality, HMO stands for Health Maintenance Organization and the reason why you might have some phone time is because the goal of an HMO is to prevent you from having to have a more serious procedure. Most of them have some coverage for hospital stays and emergency room visits, but the main goal is to do preventative medicine so you never have to see the inside of a hospital. They charge you a premium every month and when you go to visit a doctor, they charge a co-payment, or a small amount that is paid to the doctor, usually less than $30. HMOs are usually a better option because their objective is cost containment through prevention so premiums and co-pays are kept relatively low. They keep them even lower by developing a network of doctors that are contracted to take patients from the HMO at a discounted price to the HMO. So your doctors will all be in that network unless you’re willing to pay more.

The main hitch with HMOs (aside from the more restrictive network) is that you can’t see a specialist without getting a referral from your primary care physician (PCP). So if you want to go to a dermatologist, you need your PCP to give you a referral. This is to avoid having patients seeing more expensive doctors willy-nilly as that can drive up cost. Most PCPs are only too happy to give out referrals, usually without even a visit to their office, but also a lot of needs that seem to only be solvable by a specialist can be taken care of with your PCP.

A PPO, on the other hand, stand for Preferred Provider Organization. This is a network that, like with the HMO, has been selected and contracted by your health insurance, however it is usually much larger, with a lot more choice. PPOs aren’t like HMOs in their focus on prevention. They’re more wholistic in their coverage and thus, are usually more costly. Premiums cover the cost of your likelihood of going to any of the doctors in the network and your chance of not only going to the doctor for a routine physical, but also landing in the hospital for a broken bone.

Co-payments are usually higher too, though not by very much. If you can afford the more expensive premium (we’re talking 50-200% more) then you can usually afford the higher co-pays.

There are other types of health insurance, but those are the two main ones you will run into, so we’re going to leave the discussion there.

Two terms you are going to hear regardless of which type of health insurance you go with are Co-Insurance and Deductible.

A deductible is, after the premiums, the most important expense you will have to look at. It is the out-of-pocket expense you will have to meet before your health insurance will cover your medical expenses. So if your deductible is $2000, you will have to spend $2000 out of pocket before your health insurance will start to cover your medical expenses. Your doctor’s visits, lab work, shots, all count towards your deductible. The only thing that doesn’t count are your co-payments. Which sort of sucks, but that’s the system.

Co-Insurance refers to how much you will have to pay out-of-pocket to cover a procedure after your insurance has maxed out its coverage. For example, if you go to the hospital for a migraine and end up getting a CT scan and some drugs, you will pay a co-payment at the hospital before you leave and, assuming you’ve met your deductible, your insurance will start to pay your medical expenses. Let’s assume you’ve done that and your total hospital visit cost $5000. Your insurance has 80% co-insurance. That means of your $5000 hospital visit, your insurance will cover 80% or $4000, the other $1000 will have to be covered by you.

That’s how even if you have health insurance you end up with pretty hefty bills and phone time.

It’s all fairly simple to understand, but the internal rules get really complicated. Especially since not every insurance company feels everything costs the same, doctors charge different amounts and we have a huge drain on our system in the form of uninsured patients who can’t meet their medical bills.

So your health insurance company might think that migraine hospital visit was $5000, but your friend’s health insurance company might have only thought it was $4500.

Crazy, right?

Unfortunately, Obamacare does little to regulate that, much to the chagrin of those of us who would have preferred single-payer health care. But what it does do is a lot of other awesome stuff that makes health care easier to obtain for a lot of us who can barely afford it.

So when you’re looking at health care costs, the base amount you’ll have to pay every year is your premiums, deductible and co-pays before your health insurance will start to cover you, and if you have co-insurance, you’ll pay even more. It’s tough for those of us who aren’t covered under an employer plan to get healthcare, but there are good plan that are (relatively) inexpensive. Andy and I start the search for new healthcare for me this month, so I’ll give you updates as we go along.

More about Obamacare Wednesday. Please put any questions or comments you have below, but know that I don’t care if you disagree with Obamacare, I will promote it since it covered me, personally, for the last year and half thanks to the new law allowing kids to stay on their parents’ health insurance until 26 and now won’t prevent my significant other who has a pre-existing condition from getting denied health insurance should he lose his down the road.

Minor shout-out to Chief Justice Roberts who threw us all for a loop.

This entry was posted in health insurance. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s