How to Decode Health Insurance and Limit Your Spending
Can you define the following terms: deductible, co-pay, co-insurance, and out-of-pocket max? If so, good for you. You’re probably not wasting your financial resources on a plan you don’t need. If you’re like the 71% of people who can’t define or don’t fully understand these terms, this article is for you. Scroll through and learn how to be a master of health coverage.
Ben Handel, an assistant professor of economics at the University of California, Berkeley, explains the importance of insurance literacy: “People who have less information end up losing quite a bit of money—sometimes up to thousands of dollars.” Handel identifies the biggest mistake people make is assuming that the higher-tier (ie: more expensive) plans correlate to a better quality of health care. “People choosing the more generous plan thought that plan gave them access to fancier doctors and hospitals,” Handel tells The Huffington Post. In reality, “If you’re a healthy person, but you choose a very intensive plan with a lot of coverage, you’re basically implicitly subsidizing all the sick people.”
So, how do you know which plan is right for you? Saurabh Bhargava, an assistant professor of economics at Carnegie Mellon advises the following:
If you’re young and healthy, then always pick the low-coverage option. In the Affordable Care Act, this is the bronze option; in an employer plan this is the high-deductible option.
The rationale: If you’re young and healthy, the likelihood of having high out-of-pocket costs is low. However, if you choose a higher-tier plan, then you will be grouped with people who are more likely to get sick and your monthly premium will undoubtedly go up.
If you’re a healthy 30- or 40-something with children, the premium health care option still may not be the right way to go. Of course, if someone in your family has a chronic condition or you anticipate using a lot of health care, consider a premium plan. Know that when you pay for a premium plan, you’re paying for the additional cost of sharing, not improved health care quality.
Are you ready to pick a plan? Visit The Huffington Post to find out what three questions you should be asking yourself.
Track your health care documents and expenses with the cute accessories below.
At 26 years old, we’re booted off of our parents’ health insurance and forced to get our own plan. Have you experienced this transition? Share your thoughts about finding care for yourself and your family in the comments.