A key consideration when choosing health insurance is a plan’s out-of-pocket costs. These are the healthcare expenses you pay yourself, i.e. out of your own pocket. Out-of-pocket expenses are paid in addition to your monthly premium for health insurance. In order to minimize your healthcare costs, you need to look at your total annual spending for healthcare which includes not just your monthly premiums but also all the money you pay towards deductibles, copayments, coinsurance, and other out-of-pocket expenses.
The Bureau of Labor Statistics estimated that Americans paid $138.5 billion in out-of-pocket expenses. This money went for a wide range of items such as prescription drugs, medical supplies, dental care, and emergency room services
Many health insurance plans have an annual out-of-pocket maximum. This is a limit on how much you would pay out-of-pocket during a calendar year. Once that out-of-pocket maximum is reached, the plan pays 100% for covered medical services and drugs. The important thing to remember is that this refers to covered medical services and drugs. If a medical service or drug is uncovered by the plan, this out-of-pocket expense would not apply to the plan’s limit.
Starting in 2014, qualified health plans will all have a maximum out-of-pocket limit for covered healthcare services. For 2014, industry analysts estimate this limit will be $6,350. However, for those individuals with lower incomes the government shall further reduce the limit as the table below demonstrates.1
|2014 Reduced Maximum Annual Limitation on Cost Sharing for Individual Coverage||2014 Reduced Maximum Annual Limitation on Cost Sharing for Other Than Individual Coverage|
|Incomes 100 - 150 percent of FPL||$2,250||$4,500|
|Incomes 150 - 200 percent of FPL||$2,250||$4,500|
|Incomes 200 - 250 percent of FPL||$5,200||$10,400|
The information below explains some of the principal categories of out-of-pocket expenses.
A deductible is the amount of money you pay before your coverage begins. For example, if your prescription drug deductible is $100 and you have a $20 medication, you would pay full price for that medication 5 times before the insurance plan would begin its coverage for the drug.
A copayment is a fixed fee for a healthcare service or a drug. For example, a health insurance plan may charge a copayment of $10 for every doctor visit.
Coinsurance is a charge for a drug or medical service that represents a percentage of the total cost of that drug or service. For example, if a health insurance plan charges 10% coinsurance for a X-Ray, and the hospital charges $500 for a X-Ray, your out-of-pocket coinsurance payment would be $50.
Out-of-pocket costs can be significantly affected by your healthcare provider. Most health insurance plans have a network of physicians, pharmacists, hospitals, and treatment facilities with whom they have negotiated payment for healthcare services. Getting healthcare treatment “in-network” results in paying the lowest out-of-pocket costs allowed by the plan. Going out-of-network could result in much higher costs. Plans with networks typically make exceptions to higher out-of-network costs if care was received for a medical emergency.
Some health insurance plans have an annual out-of-pocket maximum. This is a limit on how much you would pay out-of-pocket during a calendar year. Once that out-of-pocket maximum is reached, the plan pays 100% for covered medical services and drugs. The important thing to remember is that this refers to covered medical services and drugs. If a service or drug is uncovered, this limit would not apply.
There are numerous public programs that assist people with medical out-of-pocket costs (e.g. the Extra Help program for Medicare beneficiaries). You can use the HealthPocket web site to compare public programs in your area.
1 DEPARTMENT OF HEALTH AND HUMAN SERVICES. "Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2014." https://s3.amazonaws.com/public-inspection.federalregister.gov/2013-04902.pdf. Accessed July 12, 2013