Understanding Private Health Insurance Plan Choices and Provider Networks Definitions Deductible Out-of-Pocket-Maximum Embedded Deductible Aggregate Deductible Networks PPO EPO HMO POS - HDHP HSA Catastrophic Plan Bronze Plan Silver Plan Gold Plan Platinum Plan Deductible A deductible is a specific amount of money that you agree to pay before you receive any benefits for covered services from the health insurance carrier. Deductibles can vary, but, for example, if your policy has a $1,500 deductible, and you receive doctor s care and medication that costs $1,200, you must pay for all of it. The carrier is not responsible for the amount of the covered service or medication you pay for up to the amount of deductible. Generally, the higher the deductible is, the lower the monthly premium will be. For example, if your plan has a $10,000 deductible, your premium would be lower than if you had a $1,000 deductible, but if you are sick or injured, you will have to pay $10,000 worth of treatment before the insurance pays anything. (Check your policy to see what the options are.) The entire deductible has to be met before your carrier will cover many of the services you could need, including hospital stays. However, the Affordable Care Act requires that plans pay for preventive healthcare services, without having to meet the deductible or require any kind of cost sharing. After you reach the deductible amount during a specific period of time, the carrier will begin paying for covered medical services and treatment, typically under a co-insurance arrangement, such paying 80% of costs, while you pay the remaining 20%. This coinsurance arrangement will continue until you reach the out-of-pocket maximum or the plan year ends. The following year you have to start satisfying the deductible all over again. Out-of-Pocket Maximum The out-of-pocket maximum is the most you will pay for healthcare in the plan year before your health insurance begins to pay 100% for covered essential health benefits. This maximum includes amounts paid for deductibles, co-insurance, copayments and other expenditures that are qualified medical expenses for the essential health benefits. It does not include premiums, out-of-network cost sharing and the spending on non-essential health benefits.
The out-of-pocket maximum for an individual for 2016 is $6,850. Embedded Deductible A type of deductible that uses both individual and family deductibles in a family health insurance policy. It is a common type of deductible, but notably, it is not used with high deductible, health-savings-account-eligible health plans (HDHP / HAS plans). With embedded deductibles, your plan tracks two types of health insurance deductibles one for the individual and one for the family. The individual deductible means that if one person in the family meets the individual deductible, coverage kicks in for that person, and the plan will then pay for health expenses for that family member, often with a coinsurance arrangement. The coverage for other family members will not start. The family deductible is often two to four times larger than the individual deductible. If the family has enough healthcare expenses that add up to the family deductible, then the health plan will pay healthcare expenses (again, often with a co-insurance arrangement) for all families members, even for those members who have not reached their individual deductible. Aggregate Deductible The deductible system most commonly used for family plans for high deductible, healthsavings-account-eligible health plans (HDHP / HAS plans). With aggregate family deductibles, the plan does not begin paying for healthcare expenses for anyone in the family until the entire family deductible has been met. Once the family deductible is met, coverage begins for the entire family, typically under a coinsurance arrangement. Recently, the Department of Health and Human Services (HHS) adjusted the rules regarding aggregate deductibles, with the changes applying to coverage in 2016. A health plan cannot require an individual to pay a deductible that is higher than the federal limit for the out-of-pocket maximum for individual coverage, even if the person is in a family plan with an aggregate family deductible. For 2016, the federal limit for the out-of-pocket maximum for an individual is $6,850. This means that if an individual, who is in a family plan with an aggregate deductible higher than $6,850, pays $6,850 towards that deductible, the coverage for that individual must then start without requiring additional cost sharing like co-pays or co-insurance. But coverage for other family members will not start until the family aggregate deductible has been met.
Networks These are the doctors, healthcare providers, facilities, and suppliers a health insurance plan contracts with to provide its members with healthcare services. Members who choose to use the providers within the network are said to be using innetwork services. Members who do not use the network of providers are said to be using out-of-network services. PPO A preferred provider organization is a type of managed care health plan. Being a managed care plan, rules exist about how you get health care, and these rules are there to keep costs down. PPOs typically use cost-sharing co-payments, co-insurance and deductibles so that you pay part of the cost of healthcare services. The idea is that if you have to pay a portion, you are unlikely to use unnecessary healthcare. Using a PPO s network of providers will mean that you pay less for your care than going to providers outside of that network. This is the incentive to use the in-network providers. However, unlike HMOs and EPOs, a PPO will often pay towards some portion of the costs when using out-of-network providers. It is also common in PPOs that many healthcare services require pre-authorization before the plan will pay. EPO Exclusive provider organization - A type of managed care health plan where healthcare services are only covered if you use in-network doctors or other providers. In that way, they are similar to HMOs, but unlike HMOs, EPO plans do not typically require you to choose a primary care physician (PCP), or get referrals to see specialists. They are like a PPO, but without the option of out-of-network care. HMO Health maintenance organization - A type of health insurance plan that usually limits coverage to care from doctors and other providers who work for or contract with the HMO (considered providers in the network, or in-network ). It generally does not cover care received from doctors outside of the network, except for emergency care. An HMO may require you to live or work in its service area to be eligible for coverage. HMOs will often focus on prevention and wellness efforts. Typically in an HMO, you have to select a primary care physician (PCP). POS Point-of-service - A type of plan that in which you pay less by using doctors, hospitals and other providers that are part of the plan s network. These plans typically require you to choose a primary care physician (PCP) and get a referral from the PCP to see an in-
network specialist. They are similar to HMOs, but differ in that you are allowed to go to out-of-network providers, although at a higher cost to you. They are point-of-service because when you need healthcare, at that point of service, you can decide to stay in-network or step outside of the network. HDHP High-deductible health plan - This is a plan that features higher deductibles than more traditional plans. HDHPs can be combined with a health savings account (HSA) from which to pay for out-of-pocket medical expenses. HDHPs can be PPOs, EPOs, or HMOs. HSA A Health Savings Account is a type of savings product that offers a different way for consumers to pay for their health care. HSAs are designed to encourage individuals to save money they may need for future health care expenses on a tax-free basis. To be able to take advantage of HSAs, you must be covered by a qualified High Deductible Health Plan (HDHP), not just a plan you consider to have a high deductible. Because an HDHP generally costs less than what traditional health care coverage costs, the money saved on insurance can be put into the Health Savings Account. People can sign up for Health Savings Accounts with banks, credit unions, and insurance companies, and sometimes their employers. These accounts can be used to pay for most kinds of healthcare expenses, including dental, vision, prescriptions and even many overthe-counter medicines. The IRS has more information on the tax benefits and consequences of HSAs. Catastrophic Plan To qualify for a catastrophic plan you must be under 30 years old or have received a hardship exemption because the local health exchange (here in Colorado, that is Connect for Health Colorado) has determined that you cannot afford the other types of health coverage. These plans usually have low monthly premiums, but with higher co-pays, coinsurance or out-of-pocket costs. The deductible must be met before services are paid by the insurance, except for three (3) primary care visits during the plan year. While they are an affordable option for those who qualify, catastrophic plans are not eligible for advance premium tax credits (APTC). Bronze Plan A plan that has a 60% actuarial value, meaning it will pay about 60% of covered medical expenses, with the remaining 40% to be paid by the consumer. In general, plans with a lower actuarial value have lower monthly premiums, but they require a higher amount of out-of-pocket payments from the consumer. Federal law established the four tiers for actuarial value.
Silver Plan A plan that has a 70% actuarial value, meaning it will pay about 70% of covered medical expenses, with the remaining 30% to be paid by the consumer. Gold Plan A plan that has an 80% actuarial value, meaning it will pay about 80% of covered medical expenses, with the remaining 20% to be paid by the consumer. Plans with higher actuarial values have higher monthly premiums, although they require lower amounts of out-ofpocket payments from the consumer. Platinum Plan A plan that has a 90% actuarial value, meaning it will pay about 90% of covered medical expenses, with the remaining 10% to be paid by the consumer. Plans with higher actuarial values have higher monthly premiums, although they require lower amounts of out-ofpocket payments from the consumer.