If you have commercial health insurance, be it a Medicare Advantage plan, a state health exchange plan or an employer plan, and you are struggling to budget for your health care, you’re not alone. Your out-of-pocket costs tend to be hopelessly complex, confusing and never-ending. To keep monthly premiums down, health plans often charge a series of out-of-pocket costs each time you use services.
What’s clear is that people who need more costly services tend to pay a lot more for their care. Unlike traditional Medicare, which spreads costs among everyone who has it, commercial health plans shift costs to people with complex conditions. In the process, they make it near impossible for you to budget for your health care. (Click here to read about why you can’t trust the health plan’s provider directory and what to do about it.) And, click here for a primer on the fundamental difference between traditional Medicare and commercial insurance.
In many health plans, you will pay a deductible, a copay and possibly also coinsurance for at least some services you receive. And, the amount of the coinsurance is not likely to be clear. Calculating total costs can be a bear. Here’s a mini-quiz: On a procedure that costs $1000, where you have a $250 deductible, a $50 copay and 20 percent coinsurance, what would you owe out-of-pocket?
What did you come up with? The answer actually depends on whether the $1000 is the doctor’s charge or the health plan’s negotiated rate, which is often lower than the charge, and whether you have already paid any of the annual deductible. But, assuming the health plan’s rate is $1000 and you have not yet paid any of the deductible, you would owe $440 in out-of-pocket costs: $250 deductible, plus $50 copay, plus $140 (20 percent of the remaining cost of $700).
The best way to budget for your care is to use in-network doctors and hospitals and choose a plan with a low out-of-pocket cap. To find a plan with a lower out-of-pocket limit, you need to understand how the plan calculates its cap. For example, if you see out-of-network providers will those costs go towards the cap? Is there a separate deductible for prescription drugs? Do your prescription drug costs apply to your out-of-pocket cap? How about your coinsurance? Each health plan is free to establish its own formula for calculating these costs.
Unfortunately, we need to address the excessive costs people must pay when they need a lot of care. No matter which plan you choose, the out-of-pocket cap is going to be many thousands of dollars. Medicare allows people to budget for their care with supplemental coverage; so should commercial insurance.
Here are four things to know if your income is low and you have Medicare. And, here are six tips for keeping your drug costs down if you have Medicare. And, here’s why you should plan ahead to keep your emergency care costs down.