Understand monthly health insurance premiums

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A health insurance premium is a monthly fee paid to an insurance company or health plan to provide health coverage.

The amount of coverage itself (that is, the amount your health insurance company pays and the amount you pay for things like doctor visits, hospital stays, and drugs) varies a lot from plan to plan, and Often there is a correlation between premiums. and the amount of coverage.

The less you have to pay for coverage, the more you will have to pay when you need medical care, and vice versa. And if your plan gives you broad access to a large network of doctors and hospitals, your premiums are likely to be higher than they would be with a plan that is more limited in terms of which health care providers you can use.

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In short, an insurance premium is a payment you make to your health insurance company that maintains full coverage; this is the amount you pay to purchase coverage. There is an expiration date and grace period for bonus payments. If the premium is not paid in full by the end of the grace period, the health insurance company may suspend or cancel coverage.

Other health insurance costs can include deductibles , coinsurance , and copayments . These are the amounts you pay when you need treatment. If you don't need treatment, you won't pay deductibles, copays, or coinsurance. But you have to pay your premium every month, whether you use your health insurance or not.

Who pays the health insurance premiums?

If you get health insurance through your job, your employer generally pays part or all of your monthly premium. Often times, your business will ask you to pay a portion of your monthly premium that will be deducted from your paycheck. Then they will cover the rest of the premium.

According to the 2020 Kaiser Family Foundation Employer Benefits Survey, employers paid on average more than 83% of total premiums for single employees and on average almost 74% of total premiums for employee families adding family members to plan.

If you are self-employed or purchase health insurance, you, as an individual, are responsible for paying your monthly premiums. However, since 2014, the Affordable Care Act (ACA) provides tax credits (subsidies) that are available to people who purchase individual insurance through the exchange .

Eligibility for premium tax credits depends on your income. Generally, there is an income limit equal to four times the poverty level, above which no subsidies are awarded. But the American Rescue Plan removed that income limit for 2021 and 2022 . Households earning more than four times the poverty line may be eligible for the American Rescue Plan premium subsidy if they would otherwise have to pay more than 8.5% of their income to purchase a comparison plan (the second largest plan with the lowest cost). silver plan).

But premium tax breaks aren't available if you have access to comprehensive, affordable employer coverage .

OTC plans purchased since 2014 are ACA compliant, but premium subsidies cannot be used to offset their cost.

Premium example

Let's say you have researched the fees and health plans to find a plan that is affordable and suitable for you and your loved ones. After a lot of research, you end up with a specific plan that costs $ 400 per month. That $ 400 monthly fee is your insurance premium. To keep all your health benefits active, the premium must be paid in full each month.

If you pay the premium yourself, your monthly bill will go directly to you. If your employer offers a group health insurance plan, your employer will pay the plan premiums, although a portion of the total premiums will likely be charged to each employee through payroll deduction (most large employers are self-insured . This means that they cover their employees' medical expenses directly, usually by contracting with an insurance company just to administer the plan.)

If you have an individual / family health insurance plan (i.e. self-purchased) through the exchange and you receive a premium subsidy, the government will pay the subsidy directly to your insurance company. You will be billed for the remainder of the premium and will have to pay your share to maintain coverage.

Alternatively, you can pay the full premium on your own each month and claim the full premium on your tax return next spring . This is not a common option, but it is available and the choice is yours. If you accept the grant in advance, you will need to reconcile it on your tax return using the same form that was used to apply for the grant by the people who paid the full price during the year.

Franchises, copays and coinsurance

Premiums are set fees that must be paid monthly. If your premiums are up to date, you are insured. However, just because you are insured does not necessarily mean that all of your medical expenses are covered by your plan.

  • Franchises . According to Healthcare.gov, deductibles are "the amount you pay for covered health care services before your plan begins to pay." But it is important to understand that some services may be fully or partially covered before charging the excess, depending on how the plan is developed.

    Eligible ACA plans, including employer sponsored plans and individual / family plans, cover certain preventive services at no cost to enrolled members, even if the deductible has not been met. And it's quite common to see plans that partially cover certain services, including office visits, emergency room visits, and prescriptions, before the deductible is met.

    Instead of the member paying the full cost for these visits, the plan may require the member to pay only the copayment and the health plan pays the rest of the bill. But other health plans are designed so that all services except the mandatory prevention benefits apply to the deductible and the health plan does not pay any of them until the deductible is met. The cost of insurance premiums is often closely related to deductibles – you'll generally pay more for an insurance policy with lower deductibles, and vice versa.

  • Surcharges . Even if your health insurance has low deductibles or no deductibles, you will likely be required to pay at least a nominal fee for most non-preventive health care services (non- grandparent health plans do not charge you for certain preventive services ).

    This fee is called a copayment, or copayment for short, and will generally vary based on the particular health care service and the individual's plan details. Most plans include both a deductible and copays, with copays applied to things like office visits and prescriptions, while the deductible applies to hospital admissions, labs, surgeries, etc. Some plans have copays that apply only after the deductible has been met; this is becoming more and more common with regard to the benefits of prescription. Copays may be higher if monthly premiums are lower.

  • Coinsurance. Healthcare.gov describes coinsurance as: 'The percentage of the cost for covered health care that you pay (for example, 20%) after you've paid your deductible. Let's say your health insurance coverage for office visits is $ 100 and your coinsurance is 20%. If you paid your deductible, you pay 20% of $ 100, or $ 20. "

    Coinsurance generally applies to the same services that would have been included in the deductible calculation before it was paid. In other words, services that are eligible for a deductible will be coinsured after the deductible is met, while services that are subject to a copayment will generally continue to be subject to a copayment.

Deductibles, copays, and coinsurance apply to the patient's annual out-of-pocket maximum . The annual cash limit is the highest total amount that a health insurer requires from a patient to pay the full cost of their care (generally, the cash limit applies only to in-network care for care medical coverage medically necessary as long as you comply with all prior authorizations). requirements ).

Once the patient deductibles, copays, and coinsurance paid for a particular year have reached their cash limit, the patient cost-sharing requirement for that particular year ends. Once the cash limit is reached, the health plan will cover the full cost of in-network covered services for the rest of the year (note that this works differently for Medicare Part A , in the benefit periods are used, rather than a calendar year).

So just because your health plan has 80/20 coinsurance (meaning the insurance pays 80% after you've met your deductible and paid 20%), that doesn't mean you pay 20%. of the total. the costs you will incur. This means you pay 20% until you reach the maximum cash limit and then your insurance begins to pay 100% of covered costs. However, premiums still have to be paid monthly to guarantee coverage.

Get the word of drug information

Health insurance premiums are often one of the most important factors when choosing a health insurance plan. This makes sense, as you will need to pay this premium every month to maintain coverage, so it should be an amount that fits your budget.

But it's also important to make sure you take all other factors into account. A plan with the lowest premium can be a poor choice if you can't pay cash when you need health care. Or if you don't include your prescriptions on your formulary . Or if the provider network is very limited and does not include the health care facilities that are most convenient for you.

Whether you're comparing just a few of your employer options, the various drug plans available in addition to Medicare coverage, or the dozens of individual / family plans for sale on the exchange, you'll want to take your time and consider all the aspects. coverage. The premium is important, but the coverage is just as important.

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