Adulting: Understanding Health Insurance (Pt. 1)
Growing up I never knew 'adulting' would be so difficult at times and that there's a crap load of things I needed to know if I wanted to be "successful" at it. What's Adulting, you ask? Well, the good ol' Urban Dictionary says it is "carrying out one or more duties/responsibilities as a fully developed individual (i.e. paying bills, lowering debts, purchasing insurance)." About a month or so ago I came across a perfect example of adulting on someone's facebook post (see below).
Over 21K+ shares, 2.4k likes, and 900+ comments later on this example of adulting, and it has been confirmed that many of us don't know ish about health insurance. That's a problem, considering anything can happen and we never know when our health insurance will need to be utilized. From understanding premiums, to figuring out what the heck a deductible and out-of-pocket is, (let's not mention the abbreviations like HMO, PPO, HSA, HRA, and FSA) health insurance can be a headache!
There are so many components, that one can very well feel like a character in #BirdBox walking blindly in the world of health insurance, unsure of what plan to purchase. Like anything we learn, knowing the basics can be very helpful and that's what today's post, and the next few posts to follow, will be all about. I want to help by defining some very important terms and touching on common questions related to health insurance, because as always, what we do today will have an impact on us tomorrow. For the month of January, I will be doing a 4-part series related to health insurance literacy, as well as knowledge regarding healthcare in general because...cliché coming in 1..2..3.. #knowledgeispower!
Health Insurance Literacy
There have been surveys created and journal articles written about the health insurance literacy gap among the American population. This could be partly related to the number of people who were uninsured prior to the Affordable Care Act, and the other reason being the difficulty in making sense of health insurance. According to the Health Insurance Literacy Expert Roundtable, health insurance literacy has been defined as "the capacity to find and evaluate information about health plans, select the best plan given financial and health circumstances, and use the plan once enrolled." (1) Find, (2) evaluate information, (3) select and (4) use. Alright, so now that we know what qualifies us as literate in health insurance, let's go a little further and learn the important components of it.
One of the most important things an individual needs to do when shopping around for healthcare insurance is choose wisely. The difficult part is understanding what THAT even means. Open enrollment workshops oftentimes explain benefits to people as if they have received prior education on the terms being discussed and that's not always the case. Imagine a recent college graduate, who is starting his/her entry level career, speaking with a representative from the Human Resource department about open enrollment. At age 22, I knew NOTHING about health insurance and when it was explained to me I remember looking at the representative like...
When enrolling in a health insurance plan, our biggest concern is "how much is this going to cost me?" It's all about them dolla' dolla' bills, y'all and rarely do we focus on all of the other little things that come into play. For example, being knowledgeable of how much the deductible is, how much is my out-of-pocket, or if the provider is in network. This may seem like I'm speaking another language, so below I will breakdown some of these terms and include examples.
Premiums: the cost/what you pay for your health insurance every month. This is in addition to other healthcare costs that may occur as you receive medical services such as copays, deductibles and coinsurance, but I'll explain that in the next few terms.
*Always keep in mind: the higher the premium, the lower your additional healthcare costs will be; the lower the premium, the higher your additional healthcare costs.*
Out-of-Pocket maximum/limit: this is the maximum amount of money you will have to pay on your own before your insurance kicks in to pay at 100% on all covered medical costs (this does not include your premium).
Copayment (copay): a flat dollar amount that you are required to pay for services with healthcare providers. There are some insurance plans that may require you to pay a $20 or $30 copay when visiting your doctor and then the insurance picks up the rest (100%).
Deductible: this is the amount you have to pay before your insurance will kick in to pay a percentage on covered services. This percentage they could range from 100-50%, depending on the type of plan you have. As you use your health benefits by going to doctor, getting blood work/x-rays, or having a procedure, you may have a deductible that you will be responsible for before your insurance makes any type of payment. This deductible is calculated and applied when your medical provider (doctors, hospitals, etc.) submit your claims to insurance to have it processed. The deductible is annual and starts over at the beggining of a new year, or new term if your plan is not based on the calendar year (1/1 - 12/31).
Cost-sharing: here's a freaky term. Cost-sharing is pretty much what it says, you share the cost of your medical services with your insurance provider - these costs can include copays, deductibles and coinsurance. At times you may see verbiage like "$0 cost-sharing," which means you will not have a patient responsibility because your insurance plan is paying 100% of the covered services.
Out-of-Pocket maximum: this is the maximum amount of money you will have to pay out of pocket before your insurance kicks in to pay at 100% on all covered medical costs (this does not include your premium). Your out-of-pocket maximum is also annual and will renew at the beginning of the year.
Co-insurnace: the percentage you pay after your deductible has been satisfied. People often think that the word coinsurance means another plan within a plan, but it's not. I think of it like co-parenting. Two people meeting in the middle to complete a task. You and the insurance are joining together to share costs.
The More You Know...
For some of you, this post may have been pointless because you find yourself to be very knowledgeable of how health insurance plans work. However, there are some who look at health insurance as a riddle and find it difficult to make sense of it all. I've been there before. People of all ages have difficulties understanding health insurance and sometimes end up purchasing a plan that is not as beneficial for them.
As we continue to age, I find it extremely important to have an understanding of how health insurance works because like I mentioned earlier, you never know when you will need it. Furthermore, there a many insurance plans out there that have cool perks, but because we lack an understanding of what the plans involve and how they work, we'd never know all of the financial opportunities we are missing. This is just Part One of the health insurance series. Feel free to share with friends and family and join in with helping people gain an understanding.
In the meantime in between time, be sure to follow me on Instagram: @gero_what or the Gero-what Facebook Page. Don't be shy, leave a comment and let me know what you think about health insurance literacy and your journey to understanding how it all works. Tune in for Part Two on next week!