A good health insurance option doesn’t have to be elusive as long as consumers consider four important numbers.
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Affordable Health Insurance Premiums
The big sticker price, a policy’s monthly premium, gets the most attention but three other factors play a role on total cost. With the right combination—a reasonable deductible, known copayments and a low out-of-pocket maximum, a health plan can cover the basics and emergencies without landing the policyholder in bankruptcy.
Getting the best rate on all four numbers could save a family buying its own health insurance significant money. Last year, the total medical cost for a typical American family of four was $16,771, compared with $15,609 in 2008, a 7.4% increase, according to recent Milliman Medical Index.
Average Costs
While Washington debates universal health coverage, health insurance costs continue to rise. As premiums go higher, more insurers are configuring individual policies to be more affordable by placing the risk on actual health care expenses. That means consumers can expect to pay higher copayments at the doctor’s office, but they can still find a monthly premium to fit into their budget.
Annual premiums vary by state. The nationwide average was $2,985 for single coverage and $6,328 for family plans in mid-2009, according to a study by America’s Health Insurance Plans, a national lobbying group for health insurers. Average annual premiums for single policies ranged from $2,606 in Iowa to $6,630 in New York.
Shop Online for Health Insurance
Several popular health insurance sites make it easy to shop options. Take a look at websites like eHealthInsurance and NetQuote to find quotes. As a rule, HMO plans are cheaper than PPO plans, but offer fewer provider choices. An even more affordable hybrid product is a high-deductible health plan, which can offer a low premium in exchange for a higher deductible. Insurers with a long reputation in the market are the most likely to meet important standards, such as compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) definitions of “creditable coverage.”
Aetna, CIGNA HealthCare, UnitedHealthcare, Humana and state Blue Cross/Blue Shield plans all offer compliant health insurance plans at a range of premium rates.
What’s In a Health Insurance Quote?
It’s common to talk about the fine print in a health insurance policy, but when it comes to everyday costs, zero in on the copayments and coinsurance. Many affordable policies have coinsurance instead of copays and insurers expect patients to share costs at every level of medical service. While copays used to be expected for the majority of services, coinsurance is becoming far more common. Since coinsurance requires patients to cover a certain percentage of medical costs, such as 20% of a hospital stay, it can add up to big expenses.
Common Deductibles
By far, the biggest single expense comes from a health policy’s deductible, which commonly averages between $2,500 and $5,000, according to AHIP’s survey. An annual deductible is the amount an individual or family must pay for medical care before health insurance costs kick in. More and more policies now offer coverage for preventive healthcare before the deductible is met, so that is an important item to examine.
Paying for Health Care Over a Year
Finally, most policies set an annual maximum on spending, or an out-of-pocket limit. It’s a good number to consider, because it offers some protection against exorbitant medical bills. The 2009 average spending limit for an individual policy ranged from around $2,600 for HMO coverage to $4,500 for PPO/POS coverage, according to AHIP. PPO/POS coverage had limits for family policies ranging from $3,000 to $10,000.
Medical Costs to Consider
It’s impossible to predict health expenses for any given year, so buying a policy based only on a cheap premium is a gamble. It’s best to gauge a policy’s affordability based on the deductible. Most likely, that $1,000, $2,500 or $5,000 expense will be the first cost of any major treatment. Regular physician check-ups and other minor illnesses are usually far less than the deductible and count toward it as the year goes on. A policy with copays instead of coinsurance may be more desirable for a family that expects a lot of physician and hospital visits.
A Lifetime of Healthcare
All policies will have a total dollar amount, a lifetime maximum per person covered by the policy. With the high cost of treating a serious chronic disease, such as diabetes, heart disease or lung cancer, this is a significant number. A 2008 study that looked at the rates Medicare pays to treat cancer found the average cost of lung cancer was nearly $40,000 in 2002, and researchers noted new treatments made the costs significantly higher every year, according to a June 2008 article in the Journal of the National Cancer Institute.
Pre-existing Conditions
In the end, it’s impossible for everyone to find a policy on the private market. Individuals with pre-existing health conditions may be priced out or denied coverage. Many states offer these individuals access to high-risk health insurance pools, but these plans are usually more expensive than a private policy.
