Image: Ias – initially / Flickr
Neglecting to look at things like cost-sharing and pharmacy tiering may end up costing you significantly down the line.
The health insurance landscape is tricky to navigate. With hard-to-understand jargon peppering each plan summary and myriad variables to consider, many people end up regretting their selection. Maybe they’re saddled with unexpected costs, or they don’t understand whether a particular medication they take is included in their plan’s formulary.
The main issue? Many of us overlook essential details of our healthcare coverage. In the interest of knowing how to choose wisely among different plan options, we’ve compiled a list of five things to which consumers ought to pay more attention when shopping for healthcare coverage.
1. Your Deductible
When they are weighing the pros and cons of two or three insurance plan options, cost-conscious consumers tend to pay most attention to monthly premiums, choosing whichever plan will cost them the least amount per month. By failing to take into account factors other than paying a low monthly premium amount, consumers don’t realize that paying more per month for a plan with a lower deductible might save them money overall.
Most consumers shop by premiums even if a higher premium and lower deductible alternative might save them money. April Seifert, president of Decision Analytics, a healthcare-focused analytical consulting company, elucidates this point:
“[Consumers] don’t realize that they’re on the hook for 100% of their medical bills until they hit their deductible,” Seifert explains.
2. The Idea of Cost-Sharing
“I think cost-sharing in general is overlooked[…]Many consumers only look to see that a service or drug is covered, but not at what cost-sharing [is] or what the network restrictions are,” says Katie Allen, the executive director at the Council for Affordable Health Coverage, an advocacy group that promotes access to affordable healthcare.
Cost-sharing is one of the core aspects of health insurance. Under any health plan, a consumer agrees to split his or her medical expenses with the insurer. Depending on the level of coverage that a person chooses (bronze, silver, gold, platinum, or other), the cost-sharing percentage shifts. At the bronze level, for example, a consumer usually assumes 40% of out-of-pocket healthcare expenses (with the insurer taking care of the remaining 60% of costs). At the platinum level, though, the policyholder is only responsible for 10% of out-of-pocket costs (with the remaining 90% covered by the insurer).
3. Pharmacy Tiering & Selective Drug Coverage
Almost all health insurance plans handle prescription drug coverage differently than other medical costs. Rather than pay for prescriptions through coded billing – which is how insurers cover medical exams, evaluations, and hospital services – insurers have formularies, which are lists of drugs your insurer agrees to pay for, at least partially, for any given disease or indication.
“Many consumers fail to understand whether a drug is included in a formulary,” says Joel White, president of the Council for Affordable Health Coverage.
The formulary process is often a hassle. The process of persuading your insurer to cover the cost of expensive, esoteric and/or name-brand drugs is fraught with red tape, approval processes, and waiting periods. Common restrictions include:
- Prior authorization: Your doctor may be required to get permission from your insurer to prescribe a specific drug.
- Step therapy: Before you are able to use a new or costly drug, you must first try a lower-priced drug for the same indication.
Then there’s pharmacy tiering. “Not all prescriptions are created equal,” as Seifert says. “Many drugs for chronic conditions fall into higher pharmacy benefit tiers, or even specialty tiers.” Consumers who need a high or specialty tier medication are often burdened with substantial out-of-pocket costs.
4. Out-of-Network Coverage
Although out-of-network coverage had, until the 1990s, commonly been available via employer-based health insurance plans, plans which include this type of coverage have become increasingly rare. Determining whether a given physician is in-network typically is the responsibility of the patient, so it’s important for consumers to ask the right questions. And since most plans do not offer out-of-network coverage, consumers are dead out of luck if their preferred doctor doesn’t accept their insurance. At the end of the day, most health insurance plans offer little to no cost sharing or price negotiation with out of network physicians.
5. Dental Coverage
Some dental plans cover, or partially cover, the cost of oral surgery. Some plans don’t. Consumers can do themselves a big favor by determining the finer details of their dental coverage before having their wisdom teeth pulled. You can read more about why you should consider adding dental coverage to your plan.