When you’re comparing healthcare plans it can be difficult to decipher what your actual annual cost will be. Unfortunately, you won’t know for certain how much you’re going to pay each year because like anything, what you pay for medical services will largely depend on the services you need. But here’s an overview of the four most common health insurance costs you should be aware of.
Your premium is the easiest cost to understand as it’s the monthly payment you make just for the pleasure of having health insurance. It doesn’t technically go toward any medical services except your free preventative care and it doesn’t count toward your deductible or your out-of-pocket maximum.
This is how much you have to pay for covered medical services before your insurance company pays for anything other than free preventative care.
Not all plans will include a co-pay or co-insurance, but if yours does, this is the amount you will have to pay each time you receive a medical service after you meet your deductible. Situations where you might see a co-pay imposed include: prescriptions, “free” preventative care visits and hospital stays. (You can pay a copay or a coinsurance before a deductible is met. This is only true via an HSA-eligible HDHP.)
Healthcare Out-of-Pocket Maximum
This is the most you have to spend for covered medical services in a plan year. It doesn’t include anything you spend on non-covered services, premiums or co-pays. After you reach this amount, your insurance company will pay for 100% of the remaining covered services.
How are These Costs Reflected in Plans?
Healthcare plans are generally rated using the metal system: Bronze, Silver, Gold, and Platinum. The cheaper the metal (i.e. Bronze and Silver), the lower the monthly premium and the higher the deductible. The more expensive the metal (i.e. Gold and Platinum), the higher the monthly premium and lower the deductible.
If you don’t plan to use many medical services and don’t take regular prescriptions, a Bronze or Silver plan might make sense. If you anticipate you’ll be a frequent user of medical services, then you might want to look into Gold or Platinum plans.
The only caveat is if you qualify for cost-sharing reductions. If you qualify for such reductions, you must sign up for a Silver plan, but your deductible will be lower and you’ll pay less each time you get care so this could end up being a great value.
HSA as a way to Save
If you’re looking for a way to save money on the out-of-pocket costs for healthcare, consider a High Deductible Healthcare Plan and Health Savings Account (HSA). An HSA is a pre-tax savings account that allows you to use the money on any health-related cost, including co-pays, deductible payments and out-of-pocket costs.
Most people are looking for ways to get the best value for the medical care they receive. Hopefully, once you’ve researched the costs for each plan you’re considering, you’ll be able to gauge the best deal for you and your family.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.