How to Examine Your Healthcare Plan and Save

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I’ve been examining healthcare plans for a couple of decades, starting with sticker shock when I signed up for COBRA coverage in 1986 (over $300 per month). Since then, I’ve been covered under employer-based plans and private individual plans, spending close to zero all the way to thousands of dollars each year for insurance coverage and medical bills.

There’s a lot to consider when looking at healthcare plans, including:

1. Guaranteed expense
2. Annual out-of-pocket maximum
3. Choice of providers
4. Potential pitfalls
5. Savings opportunities

Guaranteed Expense

Your guaranteed expense, if you choose to purchase healthcare insurance, is the monthly premium. Over the term of your contract, unless you cancel, you are locked into paying this dollar amount whether you receive healthcare services or not.

Annual Out-of-Pocket Maximum

The annual out-of-pocket (OOP) maximum may seem clearly stated but the numbers often make sense to the insurance carrier and not the insured. There may be an OOP for in-network services and another number for out-of-network services, for example. And, if you’ve chosen a plan that covers network providers only but you need to use out-of-network providers, then OOP isn’t really capped at a maximum from your perspective. (It pays to read your plan documents when you enroll so that you can choose your plan and providers carefully.)

The OOP is not same as the deductible, which is simply a hurdle to clear before becoming eligible for reimbursement of medical claims. And, oddly, the OOP doesn’t necessarily represent what you’ll pay out of your own funds, such as contributions to monthly premiums. Still, it’s a term worth learning about and dollar amount worth noting when you sign up.

On the way to the deductible and maximums, you’ll be responsible for usage-based costs (also referred to as cost-sharing items), which include:

• Co-pays, which are the relatively small payments you make when you visit the doctor’s office, urgent care facility, retail clinic, emergency room, or hospital;
   
• Coinsurance, which is the percentage of the provider’s fee (or fees) that you’ll owe in addition to the co-pay amount;
   
• Other, which may include charges that simply aren’t covered for a variety of reasons such as lack of pre-authorization for certain services, fees that exceed “usual and customary” charges, out-of-network use, and charges for services you may have received or requested but later deemed unnecessary.

Choice of Providers

The selection of in-network, participating, and/or preferred providers, such as primary care physicians, specialists, nurse practitioners, and physician assistants as well as specialized diagnostic, surgical, and hospital facilities, should be scrutinized before purchasing an insurance policy. Often, this provider list is available online but you may need customer or member access to view the provider list, which naturally makes it difficult to evaluate the plan before you enroll; so ask your insurance agent or human resources department for this information if it’s not readily available.

This information may change periodically or, as happened to me, the various databases of providers in a network (online listings vs. credentialed providers vs. insurance companies’ listing) are not in sync so that while you might use a preferred provider, the claims department may or may not pay claims appropriately because of inaccurate provider databases.

Depending on your plan, you’ll get incentives for using specific providers. Generally, you’ll get a higher percentage of your fees paid and clear the hurdle to your annual deductible and OOP much faster.

Potential Pitfalls

Pitfalls are legion.

I’ve already referenced a few of the common pitfalls, which generally surface when you use out-of-network providers. Specifically these financial disincentives are:

• No payment of certain medical bills at all
   
• Lower percentage of medical bills paid as compared to percentages paid to in-network providers
   
• No payment of charges above usual and customary fees established by the insurance company

(Some plans make no distinction between in-network and out-of-network, participating and non-participating, preferred and non-preferred providers.)

Other plan features might take you by surprise are:

• Exclusions for certain conditions or treatment protocols
   
• Non-payment if certain procedures aren’t followed, such as primary care physician referrals to specialists
   
• Riders with additional premiums for pre-existing conditions
   
• Costs of medications, which may not be covered at all or just partially covered under different rules than the healthcare insurance

You might also encounter the lifetime maximum amount, which is the amount that your insurance company will pay over your lifetime; when that limit is reached, then your claims won’t be reimbursed. (Some plans offer unlimited coverage with no caps).

Savings Opportunities

Start with choosing the right plan based on factors such as your monthly budget, your savings for medical emergencies, your anticipated needs for the coming year, your desire to have choice in physicians and treatment options. You might have access to these types of plans:

• HMO (health maintenance organization), which is usually higher on monthly premiums and lower on costs overall with strict control of healthcare services and emphasis on preventive care.
   
• EPO (exclusive provider organization), which balances premium costs with usage-based costs but is strict on using exclusive providers.
   
• PPO (preferred provider organization), which should have lower premium costs but higher usage-based costs along with fewer restrictions on providers and claims reimbursement.
   
• ABHP (account-based health plans), which typically link a high-deductible plan with some form of health account such as an FSA (flexible spending account); HSA (health savings account); and HRA (health reimbursement account); these types of plans tend to have lower monthly premiums but higher usage-based costs and are less restrictive than other types of plans.
   
• Hybrid plans, which combine features of various plans to control costs for the insured and the insurance company.

More ways to use money wisely:

• Be careful how much you put in your FSA; balance the tax advantage of funding this account with the possibility of forfeiting money if you don’t spend annual contributions by the end of the year. 
   
• Fund your HSA to reduce your adjusted gross income and your tax liability; monies in this account can be rolled over to subsequent years and even taken out (with a tax penalty) for non-healthcare-related spending.
   
• Participate in wellness programs offered by your employer or insurance carrier to get better rates or an incentive.
   
• Get preventive care offered by your insurance plan.
   
• Find a primary care physician (PCP) now so that you can get preventive care, obtain referrals to specialists if you need them, and hopefully avoid expensive trips to the emergency room.
   
• Review special rules now so that you can make sound, quick decisions later (check requirements for pre-authorizations or see which hospitals are considered exclusive providers, for example).
   
• Arrange for necessary screenings, diagnostic tests, and procedures in one year rather than spreading them over a couple years (if feasible) so that you’ll meet your deductible, reach the OOP, and get higher rates of reimbursement.
   
• Research options for emergency care before there's an emergency.
   
• Contact your insurance company before you travel either domestically or out of the country so that you can get a list of accepted providers.
   
• Take advantage of tax credits associated with COBRA.