It’s easily one of the most fiercely debated topics of the last decade, health insurance. Who has it, who doesn’t and who should pay for it. It’s also very expensive and confusing. We’re going to break down why you should get health insurance, help you understand the components, and how to go about picking an affordable health insurance plan. Prior to the Affordable Care Act (ACA), also know as Obamacare, those who couldn’t afford private insurance or didn’t get it through their employer had no options for insurance coverage. Additionally, insurance companies held all of the power. They could decide who they would cover and if they would pay out on claims. One very important change to health insurance coverage is that providers could no longer deny coverage based on pre-existing conditions. Those conditions included conditions like asthma or pregnancy. Even if someone could afford to pay for coverage, if they had even one of these pre-existing conditions they couldn’t get coverage, or it raised the price astronomically. When I was laid-off from my company, I couldn’t get health insurance because I had a history of asthma. Even though it was under control and I hadn’t been actively treated in years, I was still denied. I, like most people, just had to hope and pray I didn’t get hurt or sick. Part of being wealthy is protecting your wealth. Health insurance plays a big part in that. The majority of the households in America are one serious illness away from financial ruin.
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Why Get Health Insurance
There are several reasons to get health insurance besides the obvious. You may have heard that starting in 2014 there was a tax penalty for not carrying health insurance, but do you understand what that means? According to the ACA, everyone in the United States has to carry health insurance. If they don’t they have to pay a penalty as part of their annual IRS tax filing. Depending on the household income there are varying levels of coverage available. The two groups that haven’t carried insurance are the poor and rich. The middle class has mostly been covered through employee, though it may have not been enough. The rich don’t carry it because they have enough money to cover expenses should they get ill. The poor didn’t have it because they couldn’t afford it but probably of these groups needed it the most.
According to the ACA if a household’s yearly income is under $28,500 they will be fined 1% of their income, or $285. A household pulling in $83,400 will be fined 2.5% of their annual income or $2,085. Seems harsh, but these fines link to what it would have cost these households to buy health insurance for the year. The uninsured costs the health care system billions of dollars per year. So if everyone has insurance that cuts down on what hospitals write down as noncollectable debt.
Another reason to get health insurance is to have access to appropriate and quality care that in turn could actually reduce overall health care costs. Spending money to save money seems counter intuitive. Another part of the ACA is that prevention care is covered under all health insurance plans. That means you can get an annual physical exam without paying out of pocket. Mammograms are universally covered along with blood tests, etc. This allows health care consumers to catch conditions earlier when they are at their most treatable. If people know they don’t have to pay out-of-pocket to get an annual screening they are more likely to go. Also included are discounts for weight loss programs or smoking cessation programs. The idea is to move people toward healthier lifestyles that in turn reduce the burden on the health care system.
Besides health insurance being there to help pay for more serious conditions and/or accidents it is now required by law and it can be more of a partner in lifestyle changes. We’re seeing a trend among health insurance providers to encourage the population to be healthier. They’ve begun partnering with companies to provide healthy incentives to employees and are creating more programs to educate the general population. There is still a gap, however, if you are poor. For black women it’s important that we get coverage. The statistics are not in our favor when it comes to our health. We are more likely to die from breast cancer than a white woman, this trend could be reversed with earlier access to care that insurance provides.
How To Get Affordable Health Insurance
If you are employed by a major corporation they likely provide you with a quality insurance plan. According to the Bureau of Labor Statistics in 2013 85% of all US full-time employees had access to employer-sponsored health insurance. If you work for a small business it’s likely they don’t provide health insurance. If a business has fewer than 25 employees they aren’t required to provide insurance but they can and there are resources to help with that. So what do you do if you work for a company full time that doesn’t provide insurance or part-time for a company that does. If you can, find an employer that offers benefits to part-time employees. Among these are Whole Foods, Starbucks, Allegis Group, Costco, Lowe’s, UPS and others. If that’s not an option you need to head to an insurance marketplace.
At the federal level, you can get quotes for coverage at healthcare.gov. This site was created as part of the ACA. You can visit this site to get a quote and sign up. Every plan has an enrollment period. This is when everyone can go to the site to get access to insurance. For healthcare.gov the enrollment period for 2016 will begin on November 1, 2015. Not to worry. You can still sign up if you had a major life change such as losing or quitting your job. This is not to be confused with Medicare. This is insurance for those who are below retirement age. If you are retired you can use this site for supplemental insurance. There are plans in every price range. For example, if you live in Tennessee, in your 40’s, don’t smoke and make $28,000 per year you can get a plan for about $100 per month. Even though this site is run through the federal government, the plans are offered by major insurance providers such as Blue Cross Blue Shield, Cigna and Humana.
You don’t have to go through the government if you don’t want to. If you lose or quit your job your employer by law is required to offer you the ability to stay on your current plan, but it’s at your cost. This is COBRA. It’s temporary for up to 18 months for most employees, longer if there are extenuating circumstances. This option is typically the most expensive. You may have been paying $25 per month for coverage while your employer was paying $250 per month for you. That means under COBRA you are responsible for the whole $275 month. If you can afford that great. It’s a great if there will be a gap between jobs or while you look for more affordable insurance.
There are other marketplaces similar to healthcare.gov. It’s best to go to healthcare.gov if you are in need of a subsidy. That is built in to the search. You can visit sites such as ehealth.com or healthinsurance.org that will compare plans from major insurers. They will also check to see if you qualify under ACA and send you to healthcare.gov if that’s a better fit for your situation. Plans at these other sites start off at a higher price though, around $150 per month. If you are a smoker, be prepared to pay more. Of course you can visit the individual sites of the major insurance providers – Humana, Cigna, Blue Cross Blue Shield, Aetna.
What You Need To Know Before You Buy Health Insurance
At a basic level everyone understands how insurance works. You visit the doctor. You may or may not pay a co-pay depending on your plan. The doctor will bill insurance. Anything that is not covered under your plan will be billed to you by the insurer or the doctor’s office depending on how the plan works. Once you meet your deductible the plan changes a bit. So let’s look under the hood at some basic insurance concepts. If you have auto insurance, some of the terms are very similar.
Monthly premium is simply another way of saying what you pay every month for the coverage. Same terminology if you have car insurance.
Co-Pay is what you owe when you visit the physician or pay for a prescription. The lower the monthly premium the higher your co-pay will probably be. The more you pay into insurance they more they will pay upfront. This is completely personal. If you want to pay $10 or $50 per visit it’s up to you. If you have a large family with regular doctor visits, maybe opt for the lower co-pay.
Deductible is what you are responsible for paying. When you get into a card accident and you take your car to the shop you owe $500 toward the repair of your car. It’s the same thing with health insurance except it’s done over time. If you have an deductible of $3,000/year this means you must spend $3,000 of your own money before health insurance will pay for covered services. The higher your deductible the lower your monthly premium. This is entirely up to you as well. Determine what you would be able to pay over the year. Keep in mind that the deductible is paid over the year for each occurrence such as a doctor visit, filling a prescription or an accident.
Co-insurance is the percentage you owe. After you have met your deductible you may be responsible for a percentage of your care based on your plan. For example after you have paid $3,000 out of pocket, you pay 20% of all subsequent charges. If you get sick after you have paid $3,000 out of pocket, and your medical bills are $5,000 you are responsible for 20% or $1,000. This is not like car insurance. Once you pay the $500 deductible you’re done. The lower the co-insurance the higher the monthly premium.
Out of pocket limit is a cap on how much you will be required to pay per year. This is very helpful when diagnosed with a catastrophic disease or accident and you have major unexpected medical bills. Once you reach the maximum, let’s say $5,000, the insurance covers your costs at 100%. If you have reached your deductible ($3,000) and paid a 20% co-insurance of $2,000, the insurance will then cover care at 100%. If you have a plan with no limit, that means you could have a hefty medical bill if you have a major accident or illness.
In-Network refers to the list of healthcare providers approved by the health insurance company. Once you go out of network the costs of coverage will be much high or potentially not covered at all. This does not apply to emergency situations. If you are in a car accident you will be taken to the nearest hospital for care. You will then contact your insurance company, or the hospital will, and you will be granted coverage for emergency care. Follow-up care, however, will likely be required to be in-network.
PCP is a Primary Care Physician. This is the doctor you choose to see for everything and will refer you to other specialists as needed. The PCP is not required for all types of insurance.
A PPO, Preferred Provider Organization, is a type of insurance coverage. PPO’s are very popular. They allow you to visit whatever in-network healthcare provider you choose without getting a referral. This means you don’t need a primary care physician, though it’s advisable to have one so that someone knows your complete history. They are also the first stop if you don’t know what type of doctor to visit. These are higher premium plans.
An HMO, Health Maintenance Organization, is another type of insurance coverage. HMO’s are not very popular. They require a PCP, primary care physician. You would visit this PCP despite the problem and he/she would refer you to a specialist. For example, if you needed a pap smear you needed to visit the PCP first who would give you a referral to a gynecologist. You have so many days to visit the gynecologist before it expires. This model resulted in many people not visiting their doctors because it always required an extra step. They provide a broader range of preventative services. These tend to be lower premium plans.
Covered medical expenses are what the insurance company will pay for and at what percent. This is the tricky part of insurance and the hardest to understand. This can vary from carrier to carrier so it’s vital to understand what is and is not covered. For example, if you have to have a hysterectomy that may be covered by the insurance company but only at 75%. This means that if the procedure costs $6,000 the insurance company will only pay $4,500 and you pay the rest and it counts toward your deductible. Even if you use co-insurance, which is optional, some procedures may only be partially covered. This is the fine print you must be aware of when selecting a plan. Once you have your insurance plan in place, it’s always best to check with the company prior to undergoing any procedures or visits to understand what you will have to pay. And ask for a reference number in case they try to dispute it later. You have proof you called and of what you were told.
Here’s How Health Insurance Works
Let’s say Rachel wants to get health insurance because she quit her job to start her own business. It’s just her so she doesn’t have to worry about providing insurance to any employees. According to her budget she can afford a $150 premium. She visits a health insurance marketplace. She says she’s unemployed and needs an exception. She will then be asked her age, if she smokes, her state of residency and annual income. The site has guidelines for reporting annual income when a job loss is involved. She picks a PPO from a major insurer. Her deductible is $5,000, co-pay is $25, co-insurance is 30%, prescriptions included at 100%, and an out of pocket limit of $7,000.
Rachel visits her physician every year for a physical exam. She paid $25 for the co-pay and nothing else because preventative care is covered at %100. If anything had come up, the follow up care would have been billed to her.
One day Rachel wasn’t feeling well so she visited her Primary Care Physician (PCP). Even though she has a PPO she can still have a primary physician. The PCP is in-network so she pays her $25 to the receptionist when she enters. The cost of the visit is $100. Because she has a deductible of $5,000 she will be responsible for paying the entire $100 at the time of the visit or she will receive a bill later from either the insurance company or the doctor’s office. Her blood tests come back abnormal and the PCP refers her to a specialist. Because she has a PPO she doesn’t have to see that specialist. She looks for another in-network specialist.
She visits the specialist and pays the $25 for the co-pay and because she has not met her deductible she will be billed the full price of the visit. Rachel undergoes more tests and a procedure that takes her up to $5,000 out of pocket. She needs more treatment. From this point she will pay 30% of the charges. The specialist charges her another $10,000 for treatment. Because Rachel met her deductible she will pay 30% of that or $3,000. However, her out of pocket limit is $7,000, which she met. Therefore she will only pay $2,000 of that $3,000 as long as they are all covered medical expenses; the $1,000 will be paid by insurance. Something to note is that co-pays don’t count toward the deductible or out of pocket limit. In the end Rachel paid $7,000 plus co-pays out of pocket and insurance paid $8,000.
Rachel is doing much better, but unfortunately she had a relapse several months later and goes back to the doctor. She is hospitalized but because she has met the out of pocket limit for the year, this hospitalization is covered at 100%. This is why it’s very important to know how much you can cover out of pocket should something come up. Rachel was able to afford $7,000 out of pocket, but if you can’t consider a lower out of pocket limit.
If you are in need of health insurance, and you are if you don’t have it, here is what to do now:
- Download our health insurance guide to get started.
- Figure out how much you can afford. Don’t have a budget you can refer to, learn how to create an overall financial plan. Protecting your health is protecting your wealth.
- If you are leaving your employer for any reason, make sure you get a letter from them stating you were not denied health insurance. HR will know what this is.
- Visit the insurance marketplaces for a quote. If you are looking outside of the enrollment period you will be asked what your life change is (new child, move to a new state, job loss, etc.)
- Sign up!
- Schedule a doctor visit for some preventative screening
Every insurance company is different. You must read their fine print to understand what they offer, how it impacts your coverage and premium. They will offer you additional coverage such as major illness or accident. Again, every company is different but the basics are you are provided a lump sum in the case of a major accident, stroke, heart attack, cancer, etc. This is meant to help alleviate financial burdens as a result of accident or injury. This is entirely up to you. If you had an employer they likely offered short or long term insurance or accidental death/dismemberment insurance, this is similar while not the same.
Was this helpful? Share this within your community and comment below. Black women are the most likely to develop critical health problems that having access to health insurance can help solve. Don’t let not knowing the facts keep you from protecting your health and your wealth.
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