On Oct. 1, 2013, portions of the Affordable Care Act, also known as Obamacare, went into effect.
Health insurance exchanges in states all over the country opened for business, allowing millions of uninsured Americans access to health care. However, for many of the formerly uninsured, access to affordable health insurance is just the beginning of the process.
At the heart of Obamacare is the idea that with millions more having access to insurance, the premiums for all of us will come down.
But as many are about to find out, affordable is a relative term. Planning and budgeting for health insurance under the new rules will mean those who were not insured prior to now – and therefore have not paid premiums – will be forced to find the money somewhere.
One of the biggest challenges for these individuals will be figuring out the amount they will need to pay in premiums, deductibles, copays, coinsurance and maximum out-of-pocket expenses.
This can be confusing enough for those of us who have become used to our convoluted system. For the newly insured, understanding the terms alone will be difficult.
What is your health insurance premium, and how can you budget for it?
The premium charged for health insurance is the amount which is paid simply to have coverage.
Think of it as the minimum you will pay, with other costs such as copay and out-of-pocket expenses coming on top of the premium. The good news is there are plans that come with a very small premium, some as low as $15 per month depending on your age.
Of course, these plans have much higher copay amounts and deductibles. The point is you can choose a plan that does not cost a lot and only pay up if you require a lot of care.
What is a deductible, and how much does it cost?
The deductible is the amount you must pay before your insurance kicks in and covers the rest.
Let’s say you have a medical expense of $5,000 and a deductible amount of $1,000. After you pay the $1,000 deductible, your health insurance would cover the remaining amount of $4,000.
Choosing a plan with a high deductible is one way to lower the premium amount you pay each month.
This is only recommended for healthy individuals who do not anticipate large medical expenses.
“Only time will tell how well
these new rules will work.”
What is a copay?
Copay or copayments are the relatively small fixed payment amounts you pay for each covered medical service you use.
For example, an annual physical is covered by most plans and may have a copay amount of around $15 due at the time the service is rendered.
Copayments are also required for most prescriptions at the time they are filled. If an individual requires many different prescription medicines, a lower copay will help them to budget these expenses.
What is coinsurance?
Coinsurance is the amount you pay as a percentage of each covered service you use. Health insurance plans have a set amount they allow for health care services.
Let’s say an unscheduled doctor visit has a $100 limit set by your insurer. If your plan has a 20 percent coinsurance rate, you would pay $20 for the visit and insurance would cover the remaining $80.
This takes the place of copays, as they are for scheduled and covered services.
This is the maximum amount you pay, after which the insurance covers 100 percent of the procedure.
It does not include your premium payments and usually does not include any copay or coinsurance payments. It is used for larger, catastrophic medical expenses and is intended to prevent someone from going broke paying unexpected medical bills.
Other benefits of Obamacare include provisions that prevent hospitals from charging medical expenses to people who are least able to pay them.
The law says medical facilities must inform patients who are eligible for free or low-cost medical services or they risk losing their license to practice. It also limits the collection actions that are allowable for medical bills.
All of these provisions are intended to help keep medical costs from destroying the hard-earned credit we have built up.
Only time will tell how well these new rules will work, but I believe they are definitely a step in the right direction.
Photo source: eoionline.org