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 3.7 percent in 2019 to $389.6 billion, slightly faster than the growth of 2.8 percent in 2018. The increase in 2019 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:
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 2020 the annual out-of-pocket maximum will be at most $8,150 for individuals and at most $16,300 for families. However, for those individuals with lower incomes the government shall further reduce the limit as the table below demonstrates.2
|2020 Reduced Maximum Annual Limitation on Cost Sharing for Individual Coverage||2020 Reduced Maximum Annual Limitation on Cost Sharing for Other Than Individual Coverage|
|Incomes 100 - 150 percent of FPL||$2,700||$5,400|
|Incomes 150 - 200 percent of FPL||$2,700||$5,400|
|Incomes 200 - 250 percent of FPL||$6,500||$13,000|
The information below explains some of the principal categories of out-of-pocket expenses.
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.
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.
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.
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 2020.
|Cost-Sharing category||Deductible||Primary Care visit||Specialist visit||Annual cap on out-of-pocket costs|
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.
|2020 Pre Obamacare Health Plans||Bronze Plan||Silver Plan||Gold Plan||Platinum Plan|
|Avg. Generic Drug Copayment||$16.03||$18.41||$16.40||$12.85||$8.13|
|Avg. Generic Drug Co-Insurance Fee||22% of drug cost paid out-of-pocket||22%||25%||11%||20%|
|Avg. Preferred Brand Name Drug Copayment||$57.51||$48.00||$59.98||$45.27||$32.67|
|Avg. Preferred Brand Name Drug Co-Insurance Fee||31% of drug cost paid out-of-pocket||30%||34%||24%||15%|
|Avg. Speciality Drug Copayment||$388.71||$134.67||$451.15||$321.10||$105.00|
|Avg. Speciality Drug Co-Insurance Fee||40% of drug cost paid out-of-pocket||41%||42%||38%||42%|
1 National Health Expenditure Projections, 2019–28: Expected Rebound In Prices Drives Rising Spending Growth https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2020.00094
2 Department of Health & Human Services. "Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2020." https://www.federalregister.gov/documents/2019/04/25/2019-08017/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2020.
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