Understanding Health Care Insurance

Introduction
Health care insurance has become increasingly complex in recent years and will continue to change as our nation tackles health care reform. Below is a brief overview of insurance terms and explanation of benefits. It is important to know your insurance benefits because a common trend is increased out-of-pocket costs to patients, despite monthly premiums increasing as well.    
  

Office Visits
Office visits used to be relatively straightforward. See your doctor and pay a $10 co-pay. Now, insurance companies offer a variety of benefit plans that may limit your office visits or the type of office visits. One example is a plan that offers a lower monthly premium, but only allows you four office visits a year. Any additional visits, you would pay 100% of the contracted rate. Some plans only cover health screenings; other plans exclude health screenings. Even PPO plans have become more complex as they have created tiered systems where they designate certain physicians as “preferred providers” and offer lower co-pays sometimes. Make sure you review this section of your insurance so you know how much you pay for each type of doctor visit (primary care doctor, specialist, emergency room visit, urgent care visits).

                       
Prescriptions
Prescription coverage has become a huge cost in health care. It is important that you learn your drug formulary and review it on a regular basis. The pharmacy or you can confirm the cost of a particular medication with your plan.

*Generic Only* An increasing trend is generic only drug coverage. In most cases, generics can be prescribed to treat your condition. However, a branded medication may only be available and this may be expensive.

*Brand-name deductible* A relatively new limitation on some drug plans is a “brand-name deductible” (see below for explanation of deductible). This requires patients to pay a certain amount until the plan will begin covering a branded medication with a co-pay.

*CASH patients* When you do not have insurance and are paying cash for medications, it is worth your time to call multiple pharmacies because they vary greatly in their fees for cash patients.

True story: A patient without medical insurance came to see me for second opinion after being on medication for four months with a cost of $1200 per month. The previous doctor advised her to use the pharmacy downstairs. At our consultation, I explained to her about the variation in prices from pharmacies for cash patients. We called Costco together at her visit, and they quoted $220 per month for her medication. She could have saved almost $4000.

TIP: You do not need to be a member of Costco to use their pharmacy. If you are paying cash, they are often a good cost-savings option.

                       
Deductibles & Procedures
A deductible in medical insurance is just like a deductible you have for auto or home insurance. You are 100% responsible for the fees until you reach your deductible. In the past few years, I have seen deductibles range from $0 to $8000. It is crucial you know your deductible amount and learn what items (procedures, medications, labs, test) apply toward your deductible. You also need to know what your coverage is after you reach your deductible. This frequently varies between 100% coverage to 60% coverage. 

*Deductible Cycle* Most plans reset deductible from January to December; however, I have seen an increasing number of plans that cycle from July to June.

                
Examples
Below are examples of two different health plans receiving the same care.

Example # 1
Patient John has a monthly premium of $100, a $40 co-pay to see any doctor on his plan, a $500 prescription deductible for branded medications, $10 co-pay for generic medications, $40 co-pay for branded medications (after the prescription deductible is met), a $300 annual deductible, and 80% coverage for procedures after he reaches his annual deductible.  

He goes to see his doctor and is prescribed 2 generic medications and 2 branded medications. A mole is also excised and sent to pathology to rule out melanoma. The first branded medication is contracted at a cost of $500, the second branded medication is contracted at a cost of $300. The surgery to remove the mole is contracted at $100, repairing the wound defect is contracted at $300, and a pathology test contracted at $150.

Patient John’s out-of-pocket cost for this visit

Example # 2
Patient Jane has a monthly premium of $1000, a $20 co-pay to see any doctor on her plan, $10 co-pay for generic medications, $20 co-pay for branded medications (no brand name prescription deductible), a $0 annual deductible, and 100% coverage for medically necessary procedures.

She goes to see her doctor and has the same medications and procedures done as John from Example 1.

Patient Jane’s total cost of this visit:

At first glance, it appears Jane has a preferable plan because her cost for the visit was $80 compared to John’s cost of $950. However, if you factor in Jane’s monthly premium of $1000 compared to John’s monthly premium of $100, Jane is paying $12,000 a year in addition to the $80 cost of the visit while John is paying $1000 a year plus his $950 cost of the visit. Neither plan is "better." It will all depend on how you access your insurance. John can utilize his insurance quite a bit until he reaches Jane's annual premium cost. Jane can freely access her insurance with minimal out-of-pockets fees beyond her monthly premium, but she is paying at least $12,000 yearly because of her monthly premium.

Summary
Learning about your health care insurance plan will help you receive the best medical care without financial surprises. Before you go and see a health care provider, review your plan thoroughly.