What is a Health Insurance Deductible?

If you are buying insurance for the first time, there is a lot to learn about how a medical plan functions.  One of the things you will want to understand is how a health insurance deductible works.

Fundamentals of Insurance

To understand how a health insurance deductible works in a health insurance plan, it is important to understand a basic principle of insurance.  Instead of a person taking the chance of financial loss due to an unforeseen event, that person can pay a price (called a premium) to an insurance company, and an insurance company will accept the risk of the financial loss.  The greater the risk of loss, the greater the premium.

One way to lower the premium is to take on more risk of the loss for yourself.  A typical method employed to do this is to implement a deductible.

So What is a Health Insurance Deductible?

A deductible is a flat dollar amount that a policyholder pays before the insurance plan pays any claims.  For example, if you have a $1,000 deductible, and your medical claims are $5,000, you will pay the first $1,000, and the insurance plan will pay the last $4,000 (assuming no coinsurance).

What if you have a medical claim of just $400?  Well, you will pay $400, and on your next medical claim you will be responsible for the first $600 ($1,000 deductible minus the $400 you paid earlier).

Is Everything Subject to a Deductible?

It depends on the plan that you have.  A typical major medical plan utilizes copays for things like office visits to primary care doctors, specialists, and the emergency room.  If you pay a copay for these visits, you usually will not be required to pay your deductible on top of this (some plans do actually require a copay plus a deductible for emergency room visits).

Plans that are labeled “High Deductible Health Plans,” or HDHPs, usually require all claims to be applied to the deductible before the insurance company will pay for any claims.  This means that the policyholder will pay the full cost of medical services and prescriptions until the health insurance deductible is met.

How Can I Know What is Subject to My Deductible?

Make sure to carefully read the benefit summary of any medical plan you are thinking about enrolling in.  The Patient Protection and Affordable Care Act (PPACA), more commonly referred to as Obamacare, requires insurance companies and group plans to provide a Summary of Benefits and Coverage (SBC) for medical insurance plans.

SBCs are designed to succinctly display the benefits that a medical plan provides.  The language is easy to read, and an SBC makes it easier to compare benefits between multiple plans on an apples-to-apples basis.  This will be the best way to find out what is subject to your health insurance deductible.

How Do I Know What Deductible is Best for Me?

That really depends on the amount of risk you are willing to take.  A low deductible will require more money paid in premium.  A high deductible means lower premiums.  If you do not want to take the chance of paying a lot of money out of pocket if you need medical services, then you’ll want a lower deductible.  Just know that you’ll be paying more in premium.

A high health insurance deductible requires you to pay more money up front if you get sick, but it also lowers your premium and gives you more money to use for other living expenses.

Are You Getting The Best Deal With Your Deductible?

The last thing any of us want to do is find out we’re paying too much for a deductible that is way too high. Does that sound like you?

Fortunately, we have access to hundreds of plans and can narrow your choices down to the ones that make the most sense for your family.

All you have to do is visit this link  —->>>> Affordable health insurance

Once there you can find the best insurance plans at the best prices available.

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What is a Family Out of Pocket Maximum in a Health Insurance Plan?

When purchasing health insurance for the first time, there is much to learn about how a medical plan functions.  If you are responsible for the insurance of your family, one of the things you will want to understand is what is meant by an out of pocket maximum, specifically a family out of pocket maximum.

Fundamentals of Insurance

To get an idea of how a family out of pocket maximum works in a health insurance plan, you must understand this one basic principle of insurance: instead of a policyholder assuming the risk of financial loss due to an unforeseen event, that person can pay a price (called a premium) to an insurance company, and the insurance company will accept some of the risk of the loss.  The greater the risk of loss for the insurance company, the greater the premium.

The easiest way to lower the premium is to take on more risk of the loss for yourself.  A typical method employed to do this is to increase a policy’s out of pocket maximum.

So What is a Family Out of Pocket Maximum?

An out of pocket maximum is exactly what it sounds like.  It is the maximum amount of money that you are required to pay out of pocket for medical expenses during the year.  In the past, it was up to the medical plan to determine what all was included in the out of pocket maximum, but under the Patient Protection and Affordable Care Act (PPACA), commonly referred to as Obamacare, all expenses (deductible, coinsurance, copays) will count towards the out of pocket maximum.

The family out of pocket maximum is the maximum amount that an entire family unit on a health insurance plan will be responsible for.  This can be just two people (spouses, an adult plus one child, etc.) or up to as many people are in the family unit.  An individual out of pocket maximum is the most that one person will be responsible for.

So lets say that a policy’s individual out of pocket maximum is $1,000, and the family out of pocket maximum is $3,000.  If a family has a mom, dad, and 3 kids, then the most they all will pay together is $3,000.  If mom pays $800, dad pays $500, kid 1 pays $900, kid 2 pays $400, then the four of them together total $2,600.  That means that the family will only be responsible for $400 of medical expenses for kid 3.  Even if kid 3 gets extremely sick and is in the hospital for 3 weeks, the family will only pay $400.  The insurance plan will pick up the rest.

Does Everything Count Toward an Out of Pocket Maximum?

As mentioned above, PPACA requires all out of pocket expenses paid to medical service providers count toward the out of pocket maximum.

One thing that is not counted toward the out of pocket maximum is the premium paid to purchase the medical insurance plan, except for Medicaid and CHIP premiums.

How Can I Find Out More About the Family Out of Pocket Maximum?

Make sure to carefully read the benefit summary of an insurance plan you are considering subscribing to.  The Affordable Care Act requires medical insurance companies and group plans to provide a Summary of Benefits and Coverage (SBC) for all plans.

SBCs are required to succinctly display the benefits that a health insurance plan provides.  The language should be easy to read, and an SBC makes it easier to compare benefits between multiple plans on an apples-to-apples basis.

How Do I Know What Out of Pocket Maximum is Right for My Family?

That really depends on the amount of risk you are willing to take.  A low out of pocket maximum will require more money paid in premium.  A high out of pocket maximum means lower premiums.  If you do not want to take the chance of paying a lot of money out of pocket if your family needs medical services, then you’ll want a lower out of pocket maximum.  Just know that you’ll be paying more in premium.

To find the current family out of pocket maximum, visit the IRS website.

Are You Getting The Best Deal With Your Family Out of Pocket Maximum?

The last thing any of us want to do is find out we’re paying too much for a family out of pocket maximum that is way too high. Does that sound like you?

Fortunately, we have access to hundreds of plans and can narrow your choices down to the ones that make the most sense for your family.

All you have to do is visit this link  —->>>> Affordable health insurance

Once there you can find the best insurance plans at the best prices available.

 

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Should Young People Apply for the COBRA Health Insurance Extension?

One of the scariest things about losing a job, transferring to a new job, or going into business for yourself is wondering what will happen to my health insurance.  If you were insured through your previous employer, it can be a little overwhelming thinking about what you will do about your health care needs.  Fortunately, there is COBRA to help you along the way.  COBRA health insurance has some drawbacks, but it can help you stay covered.

What is COBRA Health Insurance?

COBRA health insurance is a law that allows an employee (or a dependent) who loses health insurance due to a qualifying event to stay covered through the group plan of their employer.  The coverage will be identical to what the individual had before the loss of coverage.

What are the Qualifying Events?

COBRA health insurance is available if the loss of coverage is due to any of the following:

  • Voluntary or involuntary termination of employment due to any reason other than gross misconduct
  • Reduction in hours of employment, thereby making the employee ineligible for coverage under their group plan
  • If the employee becomes eligible for Medicare, dependents become eligible for COBRA
  • Divorce or legal separation allows dependents to become eligible for COBRA
  • Death of the covered employee allows dependents to become eligible for COBRA
  • If a child loses dependent child status, the child become eligible for COBRA

How Long Is the Enrollment Period

An individual must be enrolled in COBRA by the later of:

  • 60 days from the loss of coverage, or
  • The date the COBRA election notice is provided by the plan administrator

How Long Does COBRA last?

If the loss of coverage is due to employment termination or a reduction of hours, COBRA health insurance is available for 18 months from the loss of coverage.  If the loss of coverage is due to any of the following, then COBRA is available to dependents for 36 months:

  • Employee becoming eligible for Medicare (COBRA is available for 36 months from Medicare eligibility date)
  • Divorce or legal separation
  • Death of employee
  • Loss of child status

What Does COBRA Cost?

A downside of COBRA is that the subscriber must pay the entire premium of the plan (plus 2% generally for administration fees).  This can come as a shock to some people who are used to just paying a percentage of the premium through their employer’s plan.  For example, if the full premium is $500, but the employer just requires a payment of $100, then the former employee will have his or her monthly insurance cost increased by $410 ($500 + 2% = $510) – $100 = $410.

Is COBRA Only Available for Medical Insurance?

An individual can sign up for COBRA for medical, dental, and vision coverage, as long as they were enrolled in these plans before the loss of coverage.

Are All Employers Required to Offer COBRA Coverage?

No, COBRA is only required for employers with at least 20 employees.

Should a Young Person Apply for COBRA Health Insurance Extension?

This is a tricky question, and it depends on the new health insurance plans available, the cost of the plans, and the health care needs of the individual.  Under the Patient Protection and Affordable Care Act (PPACA), insurance companies can no longer deny coverage for pre-existing conditions.  Therefore, it is not necessary to stay on COBRA because you are afraid of not being able to get coverage elsewhere.

However, if you look around and find that other coverage options are not as price-friendly, or do not cover the same level of benefits, it could be worth it to stay on COBRA.

But if you move to a new employer who offers health insurance, it will almost always be beneficial to switch to their plan since they will most likely subsidize a portion of the health insurance cost.

Remember, though, that there is a limit to how long you can keep the COBRA health insurance extension, so sooner or later you will have to find a new plan in which to enroll.

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Is Group Health Insurance Good for Young People?

When you are first offered group health insurance through your employer you will probably question whether it is the right insurance option for you.  There are other options available to young people at various costs, and while insurance at work provides good coverage at a reasonable price, there are also some drawbacks.

What is Group Health Insurance?

Group insurance is a way for employers to provide health insurance to their employees at a single rate.  Instead of each employee having his or her own rate based on demographics, the group as a whole is rated together.  Depending on the size of the company, the rate is based on claim experience, the insurance company’s book of business experience, or a blend of both.

Employers usually help offset some of the cost of a group plan by not requiring employees to pay the full cost of the premium.  The Patient Protection and Affordable Care Act (PPACA), or Obamacare as it is frequently called, sets limits on the monthly contribution employers can require employees to pay in a group health insurance plan without the employer facing a steep fine.

What is Good About Group Health Insurance?

As mentioned above, perhaps the best thing about a group insurance plan is that the cost is not as high as if you bought an insurance plan on your own on the individual market.  Employers almost always pay a heavy portion of the employee only premium.  It depends on the company as to how much they will pay for dependent coverage.

Group medical insurance plans will also include robust plans.  The Affordable Care Act requires coverage for certain essential benefits.  There are also caps on the out of pocket expenses that these plans can force employees to pay.

Employers use benefit brokers and consultants to help set up their packages and leverage the insurance companies for the best plans and rates available.  This helps keep costs down for everyone.

With group insurance, there are several entities that have an interest in keeping the cost of the plan as low as possible.  Because of this, many plans have robust case management programs to help employees get the most effective care possible when there is a significant medical need.

What are the Limitations of Group Health Insurance?

With a group plan the employee is stuck with the options that the employer has chosen.  A lot of thought goes into the benefit decisions, but the plans are not the best way for all employees to meet their budgetary and medical needs.  Maybe you’d like a lower deductible.  Or maybe you’d like lower premiums.  With an employer based plan, you must choose what your company has chosen for you.

Employers do not always pay very much of the premium for coverage for a spouse or children.  Even with the subsidy that your company pays for your coverage, it may still be less expensive to go elsewhere to find a family plan.

Doing a cost-benefit analysis can help determine if a group health insurance plan is right for you.  Before enrolling, make sure to check out your other options on the individual market or health insurance exchanges.  There are good options available.

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Is Catastrophic Health Insurance Good for Young Adults

If you are new to the world of insurance, it can be overwhelming to try and decide which health care coverage is best for you.  Should you pay a higher premium for a plan design with low deductibles and out of pocket limits, or you should you take a chance at high out of pocket expenses in return of lower monthly insurance premiums?  When you are looking at your options, you may have run across catastrophic health insurance.  But what does that mean, and is it right for a young person?

What is Catastrophic Health Insurance?

Catastrophic health insurance is an insurance policy which pays benefits only after the policyholder has paid a significant out of pocket expense.  Many times, a catastrophic medical insurance plan does not cover smaller, less urgent claims such as doctors visits.

There is not a dollar definition of catastrophic, but many times, people think of deductibles of around $10,000 as a catastrophic health insurance plan.  So basically, it would require a catastrophe for the plan to pay any benefits.

What is the Allure of a Catastrophic Health Insurance?

Every insurance plan, whether home, auto, medical, etc. is priced according to expected financial loss.  The more an insurance company expects to pay out in claims, the larger the premium for the policy.  Hence, a medical plan with a low deductible is going to cost more than a medical plan with a large deductible.

What that means is that, all else being equal, a health insurance plan with a very large deductible will cost much less than a plan with a low deductible.  If someone is looking for an inexpensive medical insurance plan and is willing to take on the risk of significant out of pocket cost, then a catastrophic health insurance plan is something to think about.

Should a Young Adult Consider Catastrophic Health Insurance?

Whether to buy a catastrophic plan depends on the risk the individual is willing to take.  With a lower deductible, you are guaranteed to pay higher monthly premiums for your plan, while the amount of out of pocket expense is unknown, but will not be extremely large.  With a very high deductible, however, the premiums are guaranteed to be low, but the out of pocket exposure is very large.

You have to think about your own risk tolerance and what you would be able to afford in the event of a major illness or accident.

Is Catastrophic Health Insurance Available Through Work?

Beginning in 2014, the Patient Protection and Affordable Care Act (PPACA), or Obamacare as many people know it, requires that employer offer coverage with a maximum amount of out of pocket expense or else pay a fine.  Therefore, while the limits are still high for many people, it would be hard to classify the plans as catastrophic.

Don’t Forget PPACA Requirements

PPACA requires that individuals have a suitable amount of medical insurance coverage or else pay a tax.  If you are considering a catastrophic health insurance plan, make sure that your plan meets the minimum benefit coverage requirements.

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