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Looking beyond the premium – what will your health care really cost?

Sep 24 2014

When you’re choosing a health plan, it’s natural to look at the premium first – the amount you pay every month for the plan. But that’s just one piece of the cost puzzle.

The amount you pay out of pocket can be very different from one plan to the next. Make sure you understand these costs ahead of time. That way you can choose the plan that’s best for you – and you won’t get an unpleasant surprise with your first doctor’s bill.

Most plans have a Summary of Benefits and Coverage that clearly explains the plan’s out-of-pocket costs and the services the plan does not cover. Make sure to look at yours (it should be in your enrollment materials). Here’s what to check out:

What’s the deductible?

Usually, you have to pay your bills out of your own pocket until you’ve reached a deductible. The deductible could be a few hundred dollars, or a few thousand. That’s a big difference. Plans with low premiums often have high deductibles.

Before you choose the plan with the lowest premium, take a look at the deductible. Will you be able to pay all your bills out of your pocket until you’ve spent that amount? If not, you might want to spend a little more each month on your premium, and get a lower deductible.

Important things to know about deductibles:

  • Preventive care: You don’t have to pay out of pocket for preventive care, even if you haven’t met your deductible yet. Preventive care includes immunizations, screenings such as mammograms, annual checkups, certain medications and other things like prenatal care.
  • Stay in network and save: Your plan can have two deductibles. It can have one for care you receive in the plan’s network, and a separate, higher one for care you get from doctors, hospitals or pharmacies that are not in the network. You can save a lot of money if you stay in the network.

After you meet the deductible – then what?

So let’s say you’ve paid $500 out of your pocket, or $5,000, and met your deductible. Now the plan starts to pay part of your bills, and you pay the rest. Your plan might have copays – specific amounts you pay each time you see a doctor, go to an emergency room, or fill a prescription. Or it might have coinsurance. That means the plan pays a portion of the bill and you pay the rest. These amounts, for the most common medical events, are listed on the Summary of Benefits and Coverage. Check them out. Then you’ll better understand how much you will be paying after you’ve met your deductible.

And remember, stay in the plan’s network and you will save money. Doctors and hospitals outside the plan’s network can charge you as much as they like. Generally your plan will pay a smaller portion of the cost of care you got outside the network. You pay the rest, and it can be quite a lot.

You continue to pay part of your bills until you meet your…

Out-of-pocket maximum

The good news is that most plans now have a limit on how much you pay out of pocket each year. (Your premium doesn’t count toward this maximum. Neither do charges for services that aren’t covered by your plan. Your deductible and your copays or coinsurance do count.) After you meet the maximum, you don’t pay anything for services covered by your plan.

Check for the out-of-pocket maximum in the plans you are interested in, since the amounts vary by plan. The government sets maximum amounts the plans can use, and they change every year. For 2015, the most that a plan’s out-of-pockets can be are:

  • $6,600 for coverage for yourself only
  • $13,200 for other coverage (you and your spouse, you and your family)

Plan ahead

If your benefits plan has high out-of-pocket costs, look into a Flexible Spending Account or Health Savings Account. Many employers offer them. These accounts also are available to people buying their own plans. You sign up by the beginning of the year, and put money into the account throughout the year. You don’t pay taxes on money you put into these accounts. You also don’t pay taxes when you use the money, as long as it’s spent on expenses that the government says qualify (such as doctor’s bills or prescription drugs).

But don’t forget the savings

From the first day, even before you meet your deductible, your plan is saving you money. You’re getting discounted rates from your doctor, your hospital and your pharmacy, as long as you stay in your plan’s network. You also might get access to lots of great support and tools, from nurses who help you manage a condition or decide when to seek care, to online tools and smartphone apps that tell you how much your care will cost at different locations. Once you’ve signed up, be sure to take advantage of all the power your plan gives you.

Last reminder

All plans have benefit limits and services that are not covered. If you need very specific care, check to see how the plans you are looking at cover those services. Services that are not covered add to your out-of-pocket costs.