In the United States, health care can be quite costly. Depending on the type of care delivered, a single doctor’s office visit can cost several hundred dollars, while a typical three-day hospital stay can cost tens of thousands of dollars (or even more). Most of us cannot afford to pay such big sums if we become ill or injured, especially since we have no way of knowing when we will become ill or injured, or how much care we would require. Health insurance can help to bring these costs down to more manageable levels.
In most cases, the customer (you) pays an upfront premium to a health insurance company, and that payment permits you to share “risk” with a large number of other people (enrollees) who are also paying upfront premiums. Because the majority of individuals are well for the majority of the time, the premium funds paid to the insurance company can be used to cover the costs of the (relatively) small percentage of participants who get ill or wounded. As you might expect, insurance companies have researched risk extensively, and their goal is to collect enough premiums to cover the policyholders’ medical costs. There are numerous types of health insurance plans available in the United States, as well as numerous rules and regulations governing care.
When deciding on the health insurance plan that will work best for you, ask yourself the following three questions:
Key question #1: Where can I receive care?
Controlling access to physicians is one way health insurance plans keep costs down. Physicians, hospitals, laboratories, pharmacies, and other institutions are examples of providers. Many insurance companies have agreements with a specific network of providers who have agreed to provide services to plan members at a discounted rate.
If a provider is not in a plan’s network, the insurance company may refuse to pay for the service(s) or pay a lower percentage than if the provider was in the network. This means that if an enrollee seeks care outside of the network, they may be responsible for a substantially higher portion of the bill. This is a crucial notion to grasp, particularly if you are not originally from the Stanford area.
If you have a plan via a parent and the network of that plan is in your hometown, for example, you may not be able to access the treatment you need in the Stanford region, or you may have to pay considerably more for it.
Key question #2: What does the plan cover?
One of the things that the Affordable Care Act has done in the United States is to bring more standardization to insurance plan coverage. Prior to this uniformity, the benefits provided differed greatly from one plan to the next. Prescriptions, for example, were covered by some plans but not by others. In the United States, plans are now required to provide a list of “essential health benefits,” which include
- Emergency services are available.
- Tests in the lab
- Maternity and newborn care are two of the most important aspects of a woman’s
- Treatment for mental illness and substance abuse
- Outpatient treatment (doctors and other services you receive outside of a hospital)
- Services for children, including dental and vision care
- Medications on prescription
- Preventive services (such as vaccines) and chronic disease management
- Services for rehabilitation
Asking the question “what does the plan cover” is especially crucial for our international student community who may be pursuing coverage through a non-US based plan.
Key question #3: How much will it cost?
It’s actually fairly difficult to figure out how much insurance coverage costs. We discussed paying a premium to enroll in a plan in our overview. This is a cost that you are aware of up front (i.e., you know how much you pay).
Unfortunately, this is not the only cost involved with the care you receive under most plans. When you seek medical help, there is usually a cost. Deductibles, coinsurance, and/or copays (see definitions below) represent the portion of the cost that you pay out of pocket when you receive care. As a general rule, the more you pay in premiums up front, the less you’ll have to spend later on when you need care. The lower your premium, the more your out-of-pocket costs will be when you need care.
The decision for our pupils is whether they should pay (a bigger amount) now or later.
In any case, you will be responsible for the cost of the care you receive. We believe it is preferable to pay a bigger share of the advance premium in order to reduce costs incurred at the time of service as much as feasible. We believe this because we don’t want any barriers to care, like as a hefty copay at the time of service, to deter students from seeking treatment. We want students to be able to get medical help whenever they need it.
Important Insurance Terms and Concepts:
- Out-of-pocket costs and/or cost sharing refer to the portion of your medical expenses that you are responsible for paying when you receive care. These fees are not included in the monthly premium you pay for treatment.
The annual deductible is the amount you pay each plan year before the insurance company begins to pay its portion of the costs. If your deductible is $2,000, you will be responsible for the first $2,000 in medical expenses each year, after which the insurance company will begin to pay its portion.
When you receive care that is subject to a copay, you pay a fixed, upfront sum each time you receive that care. For example, a $30 copay may be required for a doctor’s appointment, with the insurance company covering the rest. Copays are usually lower in plans with higher premiums, and vice versa. Other cost-sharing strategies are often used in plans that do not offer copays.
- Coinsurance is a percentage of the cost of your medical care that you pay. You may save 20% ($200) on an MRI that costs $1,000. The remaining 80% ($800) will be covered by your insurance company. Coinsurance is usually lower in plans with greater premiums.
- The yearly out-of-pocket maximum is the amount of cost-sharing you will be responsible for in a calendar year. The sum of your deductible, copays, and coinsurance is your coinsurance (but does not include your premiums). Once you reach this threshold, the insurance provider will reimburse 100% of your covered expenses for the balance of the plan year. The out-of-pocket maximum is rarely reached, although it can occur if a large amount of expensive treatment is required due to a major accident or illness. Out-of-pocket limits are often lower in plans with higher premiums.
– What it means to be a ‘Covered Benefit:
In the insurance industry, the terms ‘covered benefit’ and ‘covered’ are frequently used, although they can be confusing. A ‘covered benefit’ is a health service that is included (i.e., ‘covered’) in the premium paid by, or on behalf of, the registered patient for a specific health insurance policy. ‘Covered’ signifies that the insurance company will consider paying a portion of the permitted cost of a health care. This does not imply that the service will be paid in full.
In a plan where ‘urgent care’ is ‘covered,’ for example, a copay may be required. The copay is a patient’s out-of-pocket expense. If the copay is $100, the patient must pay it (typically at the time of service), and the insurance company will then reimburse the rest of the allowable cost for the urgent care service.
An insurance company may refuse to pay anything toward a ‘covered benefit’ in particular cases. For example, if a patient has not yet reached his or her $1,000 yearly deductible and the cost of the covered health treatment is $400, the patient will be responsible for the $400. (often at the time of service). This service is considered ‘covered’ since it counts toward the yearly deductible, leaving just $600 for the customer to pay for future services before the insurance company begins to pay its portion.