Insured and Broke: The Problem of Underinsurance
Unfortunately, having health insurance doesn’t mean you’ll be able to afford the out-of-pocket expenses not covered by your insurer. The Commonwealth Fund released a survey in 2014 that found 31 million adults aged 19 to 64 were underinsured. It defines an underinsured person as someone whose out-of-pocket medical expenses — not including premiums — are 10 percent or more of their household income.
Another way to determine whether someone is underinsured is if their income is under 200 percent of the federal poverty level and their out-of-pocket costs equal five percent or more of their household income. Underinsured people not only risk financial ruin, they have greater health risks, since they’re usually less likely to seek medical attention. To avoid this situation, know what you’re purchasing when you choose a health insurance plan.
Beyond Premiums:
Your Plan’s Real Costs When you purchase health insurance, you choose among plans with different actuarial values. Actuarial value is the percentage of covered expenses that an insurance policy will pay. A plan with 60 percent actuarial value means the policy will pay for 60 percent of your covered medical expenses; you’ll pay the remaining 40 percent. The difference is called coinsurance. On the Affordable Care Act’s insurance exchange, a bronze plan provides 60 percent actuarial value, a silver plan 70 percent and a gold plan 80 percent. Plans with higher actuarial values will pay more when you have a claim, but you’ll pay higher premiums every month.
In addition to the coinsurance, you’ll also have a deductible. A deductible is the amount of money you have to pay before the insurer will pay its portion of covered expenses. Except for certain preventive services that have “first dollar” coverage, you’ll pay 100 percent of your medical and drug expenses until you meet the deductible. After you pass that hurdle, your insurance company shares the costs with you, although you still must pay coinsurance. The deductible ensures the insured has “skin in the game” and understands the costs associated with receiving medical care. Without a deductible, an insured person might say yes to every test and procedure, regardless of need or usefulness.
Higher deductibles discourage unnecessary medical expenditures. Even after you meet your deductible amount, you’ll continue to have coinsurance for using medical services, such as visiting the doctor, going to the emergency room or buying prescription drugs. Remember, the lower the actuarial value of your plan, the higher your coinsurances. The good news is that the Affordable Care Act limits how much you pay from your own pocket. For 2017, a family that does not have a grandfathered plan will pay no more than $14,300 and an individual won’t pay more than $7,150 out of pocket. Once you reach the out-of-pocket limit, your insurance will pay 100 percent of covered charges. Out-of-network charges have no out-of-pocket cap.