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Your pain-free guide to health insurance

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Adapted from Better Money Habits®

Learn how different health care plans, cost-sharing options and health savings accounts (HSAs) can help keep you—and your medical bills—covered.

Choosing health care can be overwhelming—if you’re young and healthy, or just trying to save a few bucks, you might be tempted to skip it. But if you find yourself unexpectedly needing a trip to the hospital, the average three-day stay will cost you around $30,000, according to healthcare.gov. How do you make sure a broken leg doesn’t also break the bank? You can give yourself a fighting chance of keeping health expenses in check by learning about different plans, cost-sharing and how you can save with a health savings account (HSA).

1. What does health insurance cover?

The best way to find out what your health insurance includes is to ask for the Summary Plan Description.

Health insurers will negotiate the costs of, and generally help you pay for, any care that is covered. The best way to find out what that includes—ideally before you buy—is to check the Summary of Benefits and Coverage, which your employer or the exchange you’re shopping on will provide.

Read it carefully, especially if you know you have specific health care needs—for example, if you have a chronic condition such as asthma or are trying to get pregnant. It should tell you exactly what’s covered and how much you have to contribute for your care.

Your plan likely won’t cover everything: Often things like acupuncture and cosmetic surgery are excluded, which means you’ll pay full price. Plus, dental and vision care usually require separate plans. However, your plan may help defray the cost of wellness-related activities, such as your weekly yoga class or a gym membership, so read the fine print.

2. How do various plans differ, and how do I know what I need?

Each plan offers its own network of doctors and hospitals (which can belong to more than one plan) as well as specific services and prescriptions they cover. Costs between plans can vary too. Some charge higher premiums and pay more toward your care; on state and federal health insurance exchanges, these are designated platinum or gold. Others have lower premiums, and you are responsible for more of the care costs; on the exchanges, these are silver or bronze plans, or (if you’re eligible) so-called catastrophic plans.

Some plans are compatible with HSAs, which you can fund with income that won’t be subject to federal income tax, although state income taxes may apply. You can use the money in the HSA for any eligible out-of-pocket health care costs. Learn more about HSAs from Bank of America.

3. How much will you actually pay?

Even if you never step foot in a doctor’s office, you have to pay your health insurance premium periodically to keep your policy active. With an employer-provided plan, your portion of the premium might be deducted from your paychecks. If you buy a plan through a state or federal exchange, you might qualify for a subsidy that reduces the amount you pay. For the remainder, or if you buy directly from an insurer, you must send in a check or pay electronically.

Once you actually go to a doctor, you’ll likely incur more costs. Currently, the law requires your insurer to cover certain preventive-care visits and tests at no charge to you, but most other care results in a bill. Before you visit your doctor, check to see what’s covered so you don’t get caught off-guard. Here’s how you and the insurer split those costs:

Co-pays: This is a fixed dollar amount you pay for certain kinds of care. It might be $40 for each visit to a specialist or $100 if you go to an urgent care center.

Deductible: This is the amount you have to pay before the insurer starts to pay. It may only apply to certain kinds of care, such as blood tests or a hospital stay.

Coinsurance: This is typically expressed as the percentage of the total negotiated cost that you must pay. It may only apply to certain things.

If your plan requires 20 percent coinsurance for diagnostic imagery, such as X-rays, MRIs and CT scans, and you get an MRI for a knee injury, here’s how the bill might break down:

Money icon

=

Person icon

+

Insurance icon

Negotiated cost

$1,000

You pay

$200

Insurer pays

$800

4. What’s an out-of-pocket maximum?

That’s the highest amount you’ll be expected to cover in a year. Beyond that amount, the insurer picks up all the expenses. The law limits your out-of-pocket maximum for covered care, although that may still be a hefty sum. For 2020, the maximums are $8,150 for individuals and $16,300 for families if you stay in-network. For 2021, those figures are $8,550 for individuals and $17,100 for families. Depending on the plan you choose, the out-of-pocket maximum may be lower. For out-of-network care, it could be significantly higher and has no mandated cap.

5. Can you stay with your doctors?

The easiest way to determine whether your doctors are in-network is often to simply call and ask them. You can also call the insurer or check its online directory. Your plan may also cover care from an out-of-network doctor or hospital. However, it may have a different payment structure, and generally you pay more than if you stay in-network.

6. Where should you look for health insurance?

In addition to your employer, if you have a spouse or domestic partner with a good health plan you may be able to get coverage through them. If you’re under 26, you can also be covered through a parent’s plan. In addition, you might qualify for a state or federal program or be able to buy a policy through a state or federal exchange. All these are options you can explore online. You also can contact health insurance companies directly to ask about their offerings.

Learn more and take action

  • Whether you’ve just started contributing to a health savings account (HSA) or have had one for years, chances are it offers more savings power than you realize. Read this article to learn more.
  • Calculate the potential cost savings of a Health Savings Account (HSA). Try the Bank of America tool.
 
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