The affordability of a health insurance plan depends on many factors including healthcare usage, premiums, deductibles, coinsurance, copayments, caps on out-of- pocket costs, formularies, provider networks, and excluded benefits.
A consumer’s healthcare usage will impact which health insurance plans are most affordable for them. Consumers that rarely use healthcare services may find the most affordable plans to be those with low premiums and high out-of-pocket costs, whereas consumers that frequently use healthcare may find plans with higher premiums but lower out-of-pocket costs to be more affordable.
Premiums are the fixed costs that all enrollees pay for the plan regardless of how frequent they visit their primary care physician or specialists. If a consumer never visits the doctor or takes prescription drugs, then premiums are the most relevant factor for comparing the affordability of health insurance plans.
Deductibles are the out-of-pocket costs that enrollees must pay before the health insurance company pays any costs for their care.
Coinsurance is a percentage of healthcare costs paid by enrollees. It typically goes into effect only after the deductible has been paid. For example, if your coinsurance rate is 30% for a given service and the cost of the service is $100, you would have to pay $30 and your insurance company would cover the remaining $70 (supposing you have already reached your deductible).
Copayment, also called a “copay,” is a fixed amount paid by enrollees for a medical service at the time the service takes place or for a medication when the patient fills a prescription.
Caps on out-of-pocket costs are the maximum amounts that enrollees may pay in out-of-pocket costs before the health insurance plan must pay all costs for covered services. 2014 health plans have caps on out-of-pocket costs at most $6,350 for individuals and $12,700 for families. In the pre-reform market, 4% of plans lacked caps.1 Caps on out-of-pocket costs always include deductible costs in 2014 plans, but this was not always the case with pre-reform health insurance plans.
Example: Suppose Plan 1 has a premium of $200 per month, an annual deductible of $6,000, and a $6,000 cap on out-of-pocket costs. Plan 2 has a premium of $300 per month, an annual deductible of $1,000, coinsurance after deductible of 20% for covered services and drugs, and a $3,000 cap on out-of-pocket costs. If an enrollee never goes to the doctor and never gets any drug prescriptions, then their total annual costs would be $2,400 for Plan 1 and $3,600 for Plan 2 (only the cost of premiums). If an enrollee used healthcare and incurred $5,000 in expenses for covered services and drugs, then their total annual costs would be $7,400 for Plan 1 and $5,400 for Plan 2.￼
Formularies are lists of drugs covered by a health insurance plan. Enrollees will pay more if they take drugs that are not on their plan’s formulary because typically off-formulary drugs are not covered by the plan and are not included in the cap on out-of-pocket costs. HealthPocket found that the average size of formularies for Medicare Advantage plans with prescription drug benefits decreased 3% from 2013 to 2014, but the average size of formularies for stand-alone prescription drug plans increased 2% from 2013 to 2014.2
Provider networks are lists of doctors, other healthcare providers, and hospitals that provide care to a plan’s enrollees. These providers are considered to be “in- network” providers and any providers not on the list are considered to be “out-of- network” providers. Enrollees will typically pay higher out-of-pocket costs for out- of-network providers than for in-network providers. Not all doctors that work in the same hospital are necessarily in the same network.
Excluded benefits are medical services not covered by a health insurance plan. Some of the top excluded benefits in 2014 Obamacare plans are long-term care, cosmetic surgery, adult dental services, and weight loss surgeries and programs. For further details on excluded benefits, read our full InfoStat. If consumers require any of these services, then they may have to pay the full cost if their plan excludes the service.
HealthPocket is a free information source designed to help consumers find medical coverage. Whether you are looking for Medicare, Medicaid or an individual health insurance plan, we will help you find the right healthcare option and save on your out of pocket healthcare costs. We receive our data from government, non-profit and private sources, and you should confirm key provisions of your coverage with your selected health plan. If you select a plan presented on our site, you will be directed (via a click or a call) to one of our partners who can help you with your application. Our website is not a health insurance agency and not affiliated with and does not represent or endorse any health plan. HealthPocket, Inc. is a wholly owned subsidiary of Health Plan Intermediaries Holdings LLC (NASDAQ: HIIQ)