The Battle of Health Insurance Benefits vs. Budget
Tis the season … to renew your health insurance plan. As the end of the year draws near, most of us are jumping into the not-so-festive annual event of reviewing our past health care expenses — and experiences — to determine what makes the most sense for next year’s coverage.
Anyone who has done the research (and we’ve all been forced into becoming health insurance gurus) understands that the news is far from good. Although millions of people have benefited from the Affordable Care Act (ACA) with improved access and increased coverage, others are facing limited benefits. Rates and deductibles have risen at the same time covered services and service networks have narrowed. This squeeze is resulting in people being pushed out of the system.
Many people are now investigating their opportunities and purchasing other types of insurance, such as short term health, zero deductible insurance, and supplemental benefit plans.
While the individual consumer’s out-of-pocket portion of health care continues to climb, people are facing two scary propositions: go with costly coverage or take a chance on being uninsured. We’ve all heard the horror stories of people facing bankruptcy after a catastrophic and costly health-related issue. But the comfort of insurance is out of reach when the price of a plan makes it impossible to afford.
In this ongoing tug of war between insurance benefits and personal budgets, it doesn’t seem like there is much hope. But in fact, there are easy and smart ways to bring balance to the coverage you want and the coverage you can afford called alternative health insurance.
Balancing Benefits And Budget
There is a set of coverage programs — short term medical, zero deductible plans and supplemental insurance — that work to extend your choices and your dollar.
To understand how these [alternative] plans work — and determine which ones may be right for you — let’s start with a brief refresher on the definition and differences of three key insurance terms: deductible, out-of-pocket maximum and premium.
A deductible is the fixed amount a patient must pay during a given time period — usually annually — before the health insurance begins to cover costs. Once you hit this deductible amount (often in the $3,000-$5,000 range, but many plans have much higher deductibles), insurance takes over the applicable payments for future services. From 2013 to 2017, deductibles rose sharply, with average individual deductibles increasing more than $1,000 to over $4,300 and average family deductibles rising more than $4,000 to over $8,300.
An out-of-pocket maximum is the most you will pay for services covered by your insurance plan. Plans that include an out-of-pocket maximum pay the full amount for covered services once you have paid that maximum amount. The out-of-pocket maximum includes the deductible, plus any copays or coinsurance that the plan requires you to pay. Obamacare plans’ out-of-pocket maximums for 2018 are $7,350 for individuals and $14,700 for family coverage.
A premium is a monthly or quarterly bill you pay for a plan. In essence, this is the starting point for the cost of health insurance. Deductibles, copayments and coinsurance can be extras to this base fee. For the individual health insurance market, the national average increase in rates is approximately 29.5%. Fifty percent of this jump is due to the cost-sharing reduction cut-off made by the Trump administration along with the ongoing concern about whether or not the individual mandate penalty would be upheld. Both these points have put the market in a state of flux, and some insurers are raising pricing to cover potential issues such as healthy people not buying into a plan, which is needed to offset consumers in the pool who need extensive medical services.
In this current state of health insurance, choosing a medical plan can be compared to making your way across a balance beam. Go for a program with a lot of high-end benefits — including all network access — and you may tip over on your budget. Lean toward a policy that is less expensive at enrollment, and you may have to pay more later if an unexpected event or illness requires extensive medical care. Walking that fine line between cost and need can be precarious.
With short term health insurance and zero deductible benefit plans, it is possible to maintain that much-wanted insurance security at a cost that is typically 50% less than traditional health insurance. Supplemental insurance can reduce your risk exposure for a low premium cost. Each option serves a specific purpose and offers specialized coverage. These types of insurance can support you in the event unforeseen medical expenses pop up. As with all health insurance, it’s important to carefully review an alternative insurance policy to understand how it helps, what it covers and what is excluded.
Zero Deductible Health Insurance
With zero-deductible health insurance, a pre-determined amount is paid on a per-period or per-incident basis, regardless of the total charges incurred. For example, a plan might pay $200 when you are admitted to the hospital and $100 per each day you are there. Your insurance benefits are triggered by the medical service event but are not tied to the actual amount billed. The value of a zero-deductible/fixed indemnity plan includes:
- A deductible or coinsurance is typically not required (which is why these plans are also called zero-deductible or no-deductible insurance)
- Defined benefits are stated so you know your cash payout amounts upfront tied to many common medical services, such as doctor office visits, hospitalization, surgery, imaging and medication
- The money is paid directly to you versus the medical provider, so you can decide to apply it to pay medical bills or other expenses
- Monthly rates are usually lower than more comprehensive insurance
- Ability to cancel at any time
Another advantage of zero-deductible/fixed indemnity is that it can allow you to expand your health care network without the high price tag. There is no required medical network you must use to maximize your benefits, as there is in many major medical plans.
Short Term Health Insurance
Short term health insurance is an excellent policy for individuals and families who are in need of an affordable ‘”safety net” while in between health plans. This coverage gap can be the result of various life events such as unemployment, divorce, retirement, college graduation … anything that impacts where and how you get your coverage. The advantages of purchasing this solution include:
- Features that are comparable to major medical but with a smaller price tag
- The ability to be purchased (and canceled) at any time, so if you miss open enrollment cut-off (which is possible with this year’s shortened timeframe), you can still get it
- An easy application process and access to coverage as early as the next day
As the name indicates, this insurance is meant to be used for a specified timeframe — currently 90 days, but that will be changing soon. In the meantime, right now, Pivot Health offers four back-to-back terms, resulting in coverage for nearly a year. It is often viewed as an interim fix for healthy people because it does not cover pre-existing conditions.
Through President Trump’s Executive Order in 2017, the federal agencies are now working on new regulations that will allow short term medical plans to be available for up to 12 months, instead of 90 days. It is expected that this new regulation will become effective sometime in 2018. Meanwhile, by extending short term medical insurance to four back-to-back coverage certificates through Pivot Health, you can have that same advantage. It’s important to remember that short term insurance coverage does not meet the minimum essential coverage requirements under the ACA and, therefore, can be subject to a tax penalty, unless the individual mandate penalties are repealed.
Also, note that the individual mandate tax penalty is eliminated in cases when ACA-compliant health insurance options are considered to be unaffordable. So, if the annual premium for a market’s lowest priced plan costs more than 8.16% of a household’s modified adjusted gross income (or MAGI), the mandate for minimum essential coverage — and the individual mandate penalty — is waived.
Supplemental Health Insurance
Another layer of medical insurance protection comes in the form of supplemental health insurance. This is another add-on policy that comes in a wide range of forms: short-term disability, long-term disability, accident insurance, life insurance and dental/vision insurance. It supports or supplements your primary health insurance coverage that has restrictions on specific health-related needs. It can help you pay for services and out-of-pocket expenses that your regular insurance doesn’t cover.
Supplemental insurance can also come into play when an individual is working through the benefits-budget balancing act. You might decide that it makes sense to go with a plan that features a high deductible (so you have a lower monthly premium). The usual thinking in this scenario is, “I haven’t needed to tap into my health insurance very much in the past few years, so why pay the higher price monthly cost for something that I’m rarely using.” But in the event a big-ticket health expense — due to accident or illness —happens, your supplemental plan can pay you cash which can go toward lost wages, food, medication, expenses or transportation costs related to your health condition.
Just like short term health insurance and zero-deductible plans, supplemental insurance is available year-round, can be bought and removed at any time, and offers an excellent extra layer of protection.
As health insurance premium costs continue to increase and out-of-pocket expenses (high deductibles and coinsurance) keep rising, the coverage options of short term medical, zero-deductible and supplemental coverage become more important to millions of consumers. So, remember, when you are faced with health care coverage decisions during these budget-busting times, you do have alternatives.