Many students find that they have several options when it comes to their health insurance. The sheer number of choices can be overwhelming when you are trying to make a decision, but choosing your policy carefully will help you get the best deal.
How does health insurance work?
When you buy health insurance, you enter into an agreement with an insurance company. You agree to pay a monthly bill, or premium, and the insurance company agrees to provide you with benefits, often by paying some or all of your expenses if you get sick, need a prescription, or require other medical attention. These expenses are outlined in advance, when you first buy the policy. That’s why the fine print is important.
What benefits does health insurance cover?
Policies differ greatly, so be sure to request a “Summary of Benefits and Coverage” from your potential insurance company. This document should itemize exactly which benefits are covered—and to what degree—and which aren’t.
The Affordable Care Act does mandate that U.S. insurance companies cover 10 essential health benefits (EHB) for individual and small group policyholders.
- Ambulatory patient services (outpatient care available to patients who are not admitted to a hospital)
- Emergency services
- Hospitalization (e.g., surgeries and inpatient care)
- Pregnancy, maternity, and newborn care
- Mental health and substance abuse services (including behavioral health treatment)
- Prescription drugs
- Rehabilitative and habilitative services and devices (addiction treatment)
- Laboratory services
- Preventative and wellness services and chronic disease management
- Pediatric services (which include dental and vision care for children; adult dental and vision care are not considered EHB)
It is nearly impossible to find a plan that will pay 100% of your medical expenses, even those associated with EHB, but the above benefits must be covered to some degree by your insurance company. Even after paying your monthly premium, you may be responsible for a set cost or certain percentage of the above services.
How much does health insurance cost?
The cost of your health insurance depends on two factors: the fixed rate of your monthly premium and the out-of-pocket costs associated with the specific care you need.
What is a premium?
A premium is the monthly cost of your health insurance. It is a recurring bill, just like your phone or wifi bill. You usually pay it the same day each month.
In general, the higher the monthly premium (the more you pay in advance), the less you will have to pay when you do get sick. Therefore, higher monthly premiums usually indicate substantial coverage, and cheaper monthly premiums usually indicate minimal coverage.
What affects the rate of a monthly premium?
Insurance companies determine the rate of your premium based on the current costs of medical procedures and pharmaceuticals. They then factor in how likely it is for policyholders to need that care. These calculations are hypothetical. The Affordable Care Act made it illegal for insurance companies to discriminate against customers based on their sex or gender identity, medical history, or preexisting conditions. This means that if you have a chronic illness, a health insurance company cannot charge you a higher premium or otherwise refuse to offer you affordable coverage.
It is legal, however, for insurance companies to adjust the cost of their premiums based on your age, region, and history of tobacco use. These factors show how likely it is for you to need care and how expensive the care is predicted to be in your area.
What are out-of-pocket costs?
If you never visit the doctor or fill a prescription, you will never have to pay an out-of-pocket cost. Out-of-pocket costs depend on the care that you access. If you do receive medical attention, you will share the cost with your health insurance company. The amount of your out-of-pocket costs depends on your health care plan, but information should be available on the “Summary of Benefits and Coverage” document that your insurance company will provide you before you buy a plan.
There are three types of out-of-pocket costs:
- Co-pays are fixed prices that a policyholder must pay upfront for certain health care services, such as office visits, emergency services, or prescriptions. You or your insurance company may be billed later for the rest of the costs of service. Plans with higher premiums usually offer lower co-pays.
- A deductible is the specified amount of money that you must pay for covered health benefits before your insurance will pay your claims for you. If your deductible is $1,500, for example, your insurance company will not pay any of your costs until you have paid $1,500 out of pocket for health care services. In other words, some insurance plans will not pay any of your health care costs until you “meet” your deductible (other plans will pay a small percentage of your health care costs before you meet your deductible). Most of your medical costs, including your co-pays, count toward your deductible; your monthly premium does not count.
- Coinsurance describes how you and your insurance company will split a bill for coverage. It usually uses a percentage or ratio. A plan with 80/20 coinsurance means that once you meet your deductible, your insurance company will pay 80% of your medical costs and you will pay the remaining 20%. For many plans, coinsurance kicks in once you meet your deductible. Other plans may offer coinsurance right off the bat, every time you buy a prescription, for example. Plans with higher premiums usually lower your coinsurance in your favor.
When does an insurance company pay the full bill?
Besides having a set deductible and predetermined co-pays and coinsurance, your plan offers you an out-of-pocket limit. This is the absolute most you must pay toward your health care in any year before your insurance will foot 100% of the costs. Included in your maximum out-of-pocket limit is any money you put toward your deductible, co-pays, and coinsurance. Your monthly premiums will never count toward your out-of-pocket maximum, nor will any non-covered benefits, such as elective surgeries. It is unlikely that you will meet your maximum out-of-pocket limit in any given year.
In 2016, the maximum out-of-pocket limit for an individual is $6,850. For a family, the limit is $13,700. If you subscribe to a plan with a higher monthly premium, it is likely that your out-of-pocket limit will be lower than the national maximum.
Your insurance company is responsible for any of your health care costs that exceed your out-of-pocket maximum, but you must continue paying premiums.
How do I choose the best plan for my situation?
It is important to consider both your health status and your financial situation when deciding on an insurance policy. In an ideal world, you’d find a policy that offers the most coverage for the lowest monthly premium, but that isn’t necessarily a realistic goal in the current health care marketplace.
Typically, the more health care you need, the more out-of-pocket costs you will incur and vice versa. It is essential that you consider your health status when deciding on a plan.
- Do you get sick often?
- Do you visit any specialists regularly?
- Do you take any daily medications?
- Do you participate in contact sports or do high-impact exercise?
- Are you pregnant or is there a chance you will become pregnant this year?
- Are you at risk of developing a hereditary condition that would impact your health?
The more “yes” answers you have, the more likely it is that you would use extensive health care benefits if you had them. If you have a preexisting condition or if you are prone to sickness or injury, for example, you may want to invest in your health by purchasing a plan with a higher premium. These higher monthly bills often help you enjoy lower out-of-pocket costs when you do access health care.
If you hardly ever get sick and don’t take any daily medications, you may not need the most extensive coverage. You may decide to pay a lower monthly premium for lesser or minimal coverage. This is a bit of a gamble. Though you may not have seen a doctor once last year, an accident could change your health in the future. If you do pick a lower monthly premium, your out-of-pocket costs will be higher when you do access health care. You will have a high deductible, high co-pay, high out-of-pocket maximum, and high percentage of co-insurance to pay.
To help you find the best level of coverage for your health care needs, insurance companies sort their policies into four groups based on their premiums, out-of-pocket costs, and extent of coverage: bronze, silver, gold, and platinum. These metal tiers help you determine which plans offer more coverage and which offer less. Metal tiers help you determine the average percentage of health care expenses covered under a plan.
|Metal tier||Coverage by your insurance company*||Cost to you*|
*Figures are approximate.
Bronze plans have the lowest premiums and highest deductibles and out-of pocket costs. Platinum plans have the highest premiums and the lowest deductibles and out-of-pocket costs. Silver and gold plans fall in the middle.
What are catastrophic plans?
Catastrophic plans offer coverage for people under 30 years old. Their benefits are so minimal that the plans falls below the bronze tier. The monthly premiums for catastrophic plans are low, but the deductibles are very high. In fact, deductibles for catastrophic plans are typically $6,850, which is the maximum out-of-pocket limit by law.
Picking a catastrophic plan is risky. You will be responsible for all of your health care costs (e.g., full cost for office visits, emergency services, etc.) until you reach that $6,850 deductible. At that point, your insurance covers your EHB. These plans protect you only in the worst-case scenarios, so they should be considered a last resort for coverage. It is advisable to consider a bronze plan (or better!), if you can afford it.
How do insurance companies work with provider networks?
At any metal tier, you can find additional options, usually including a choice between a Health Maintenance Organization (HMO) and a Preferred Provider Organization (PPO). Your choice determines how your health care coverage will be administered.
What is an HMO?
Health Maintenance Organization (HMO) plans partner with networks of providers to get discounts, and those discounts are then passed on to you, the policyholder. HMO plans will typically save you money because they offer lower premiums. If you elect an HMO plan, you will choose an in-network primary care physician (PCP) who will make decisions about your care with you. If you need to see a specialist of any kind (e.g., mental health counselor, physical therapist, gastroenterologist, etc.), you must first make an appointment with your PCP to get a referral, except in an emergency.
With an HMO plan, you may also find that your options for care are limited. Certain doctors and hospitals may not participate in your policy’s network, in which case you would have to choose a different physician or hospital if you want to access your health care benefits. Typically, if you decide to see a doctor that is out of network, you will be responsible for the full bill.
What is a PPO?
Preferred Provider Organization (PPO) plans often cost more than HMO plans because you are paying for the convenience of seeing any health care provider that you want, usually without a referral. You may see doctors that are in or out of your network, but out-of-network visits may cost more.
How do I consider my prescriptions when deciding which policy is best?
If you regularly take any medications, it is a good idea to know if they are covered by your policy beforehand. Most insurance plans offer a drug formulary, which is a list of generic and brand-name drugs that are covered by a plan. The formulary may also detail how expensive each drug is. If you rely on one or more prescription drugs, request a copy of the formulary before you purchase your plan.
Where can I search for health insurance plans?
If you are a U.S. citizen or legal resident (including international students), you may want to cross-check the cost of your student health insurance with similar plans on the exchange. Use the map below to connect with the exchange (federal or state) that is used in your area.
Health Insurance Map
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