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Health Insurance: how much it really costs

It is my distinct pleasure to announce that I’ll be interviewing Sylvia Matthews Burwell on Thursday, January 29 at 12:30 Live on YouTube. I’ll share the link and details in a future post.

In my preparations for the interview, I put out a call for questions on Facebook. I was somewhat surprised by the questions coming in and it caused me to evaluate my own employer based insurance plan and the associated costs.

Employer Based Health Insurance Coverage

To give some context, I grew up on the State of Michigan Education Association insurance (MESSA) because my Mom was an educator. When I say it was the best, I really mean it. Back when I was knee-high to a duck (under the age of 10) I think co-pays were $2 for office visits and prescriptions were free. It seems as though everything was covered. But the time I was a teen, copays may have been $4-5 and prescriptions were $0.50 for the same coverage. Oooo, big money, right?

Needless to say, I grew up without a full appreciation of the costs associated with healthcare. Fast-forward to now, I’m covered through my employers health plan. I have been pleased, thus far. Here is a breakdown of my 2014 annual healthcare costs (click the table for a clearer image):

2014 healthcare costs

Let’s take a deeper dive into what this means to my pocketbook.

My medical/vision/prescription/dental premiums are a deduction from my paycheck. My copays for doctors office visits, prescriptions and urgent care are my responsibility at the time of service and are considered out-of-pocket costs. In 2014, I was healthy, no chronic disease, no ER visits and no hospitalizations. I saw a specialist twice ($30/per visit), had my annual GYN exam (no copay), went to urgent care once ($40 co-pay), saw my doctor, had lab tests and radiology studies, as well as a few acupuncture visits. I estimate that I spent a total of $300 in copays for those services in 2014.

As you can see, my employer picks up the vast majority of the expense for my healthcare coverage. Overall, I only pay about 20% of the total associated costs. This is a strong incentive for employer based coverage. As with anything though, there are limitations to this coverage. In order to contain costs, I’m required to stay in-network. This requires some research and diligence. With that said, I’m more than happy to put in the work, because I know that limitations of what I can afford. I simply cannot afford to go out of network. Thus far, it has not been a problem. Fortunately, I work at a world class institution and have access to some great doctors.

Affordable Care Act Coverage

In addition to my full-time job, I’m also an entrepreneur and I look forward to building up a successful microbusiness that will allow me to be self-employed in the near future. Therefore I have a vested interest in the Affordable Care Act and my options as a self-employed individual requiring coverage. For that reason, I went to Healthcare.gov and previewed the plans and pricing for similar coverage to what I have now. In this example, the coverage is to be for an individual (1 person) with an estimated household income to be $60,000 (gross), 39 y/o, non-smoker, not pregnant in zip code 48504 (Flint, MI).

There were a total of 98 plans available to me and no tax incentives, but I focused on the PPO’s.

Preferred Provider Organization (PPO): A type of health plan where you pay less if you use providers in the plan’s network. You can use doctors, hospitals, and providers outside of the network without a referral for an additional cost.

I decided this plan would suit me best based on my current health, anticipated needs for 2015 and how I like to consume healthcare services.

BCBSM Platinum PPO

Whoa, $534! Looks alarming, yes? Let me explain my choice. I want to keep similar coverage to what is provided by my current employer. Beyond the premium, I want my maximum out of pocket cost to be minimal, therefore, it will drive up the cost of the monthly premium. Overall, this plan will cost me $6,408 each year in premiums, however, my out of pocket costs should not exceed $1,000. I can expect to pay no more than $7,408 for healthcare associated costs for 2015. This compares with the $7,887.50 for the annual costs of my current coverage through my employer. The difference is, I would be  100% responsible for paying the premiums and out of pocket costs if I go through the health insurance exchange. Not so alarming anymore, is it?

Planning For Coverage

Managing healthcare costs takes a bit of research in order to keep costs to a minimum.

Here are my recommendations:

  1. Assess your general health and make note of how often you see a doctor on a yearly basis. Anticipate how you will consume healthcare services over the course of the next year. (Family planning, chronic disease management, surgery, mental health services, alternative therapy, etc.) Obviously, there are no guarantees and sickness or catastrophic illness can result at any time.
  2. Clearly understand the maximum out of pocket costs associated with the plan selection.
  3. Review the provider directory.
  4. Prescription benefits: If you have been prescribed a medication that you will take long-term, check the plan formulary to see if it’s covered.
  5. Keep a summary of the plan benefits handy so there are no surprises

Glossary of Terms

Deductible: you must pay out of pocket, all the costs up to the deductible amount before this plan begins to pay for covered services you use. This does not apply to preventive services. Preventive services are included.

Out of pocket limit:  the most you could pay during a coverage period (usually one year) for your share of the cost of covered services. Note: the insurance premium you pay on a monthly basis is not an out-of-pocket expense.

Copayments: are fixed dollar amounts (for example, $15) you pay for covered health care, usually when you receive the service. Coinsurance is your share of the costs of a covered service, calculated as a percent of the allowed amount for the service. For example, if the plan’s allowed amount for an overnight hospital stay is $1,000, your coinsurance payment of 20% would be $200. This may change if you haven’t met your deductible.

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