Out-Of-Pocket Costs

07-12-2017

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Out-Of-Pocket Costs

Overview

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 National Health Expenditure Accounts reported that out-of-pocket spending in the United States grew 2.6 percent in 2015 to $338.1 billion, slightly faster than the growth of 1.4 percent in 2014. The increase in 2015 was influenced by the expansion of insurance coverage and the corresponding drop in the number of individuals without health insurance. 1 This spending is for a wide variety of services and goods including:

  • Hospital care
  • Physician and clinical services
  • Other professional services (such as physical therapy, optometry, podiatry, and chiropractic medicine)
  • Dental services
  • Other health, residential, and personal care services (such as medical services from providers at settings like schools, community centers, the workplace, ambulance providers, and residential mental health and substance abuse facilities
  • Home health care
  • Nursing care facilities and continuing care retirement communities
  • Prescription drugs
  • Durable medical equipment
  • Other non-durable medical products

Annual Out-Of-Pocket Maximum in 2017

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 not covered by the plan, this out-of-pocket expense would not apply to the plan’s limit.

Since 2014, qualified health plans have had a maximum out-of-pocket limit for covered healthcare services. For 2017 the annual out-of-pocket maximum will be at most $7,150 for individuals and at most $14,300 for families. However, for those individuals with lower incomes the government shall further reduce the limit as the table below demonstrates.2

2018 Reduced Maximum Annual Limitation on Cost Sharing for Individual Coverage2018 Reduced Maximum Annual Limitation on Cost Sharing for Other Than Individual Coverage
Incomes 100 - 150 percent of FPL$2,450$4,900
Incomes 150 - 200 percent of FPL$2,450$4,900
Incomes 200 - 250 percent of FPL$5,850$11,700

Types of Out-of-Pocket Expenses

The information below explains some of the principal categories of out-of-pocket expenses.

Deductible

A deductible is the amount of money you would pay for covered health care expenses before your plan would pay any costs. 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 paying for the drug.

Copayment

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

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.

In-Network & Out-of-Network

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.

Public Programs and Out-of-Pocket Costs

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.

Average Out-of-Pocket Costs for Metal Plans on the Individual and Family Market

Entry-level Bronze plans are required to cover only 60% of covered medical expenses for a typical enrollee population, while Silver plans cover 70%, Gold plans 80%, and Platinum plans 90%. HealthPocket calculated the following average out-of-pocket medical costs for individual marketplace metal plans in 2017.

Cost-Sharing categoryDeductiblePrimary Care visitSpecialist visitAnnual cap on out-of-pocket costs
Bronze$6,09230%31%$6,904
Silver$3,572$30$58$6,449
Gold$1,197$24$45$4,889
Platinum$405$16$33$2,159

With the release of the new Obamacare metal plans, prescription drug coverage is now included with all new health plans in the individual & small group markets. HealthPocket calculated the following average out-of-pocket drug costs for individual and family marketplace metal plans.

 2017 Pre Obamacare Health PlansBronze PlanSilver PlanGold PlanPlatinum Plan
Avg. Generic Drug Copayment$14.83$21.65$14.06$12.56$8.95
Avg. Generic Drug Co-Insurance Fee21% of drug cost paid out-of-pocket26%15%12%30%
Avg. Preferred Brand Name Drug Copayment$47.42$63.41$49.46$42.62$32.64
Avg. Preferred Brand Name Drug Co-Insurance Fee27% of drug cost paid out-of-pocket31%24%25%27%
Avg. Specialty Drug Copayment$214.57$332.31$246.23$169.21$91.43
Avg. Specialty Drug Co-Insurance Fee35% of drug cost paid out-of-pocket38%36%34%34%


Sources:

1 Centers for Medicare & Medicaid Services. "National Health Expenditure Projections 2012-2022." http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf.

2 Department of Health & Human Services. "Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2018." https://www.federalregister.gov/documents/2016/12/22/2016-30433/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2018.

 

 

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