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8 things to know about your health care plan

The fine print in your health insurance coverage, explained

Understand Your Health Insurance Plan

If you’ve ever opened a hospital bill and gotten sticker shock, you’re not alone. In 2015, nearly 25% of people in the U.S. reported having some difficulty paying their medical bills.

It takes just one sky-high medical bill to prove that not all health insurance is created equal. In fact, while low deductibles and premiums may be tempting, they can leave you scratching your head when the bills come due.

Nearly 12 million Americans were enrolled in quality health insurance plans through HealthCare.gov, a government website managed by the U.S. Centers for Medicare & Medicaid Services, in 2015. It offers plans in four tiers—Bronze, Silver, Gold, and Platinum.

Kevin Counihan, CEO of HealthCare.gov, says if you’re insured but surprised by how much you pay in medical bills, it could be that you picked the wrong plan. “What we’ve found is people make mistakes choosing the wrong level tier. For example, sometimes people will choose the Silver or Bronze tier. They find it more seductive because it has a lower premium than the Gold plan. But they can actually end up spending more out of pocket.”

And this happens, Counihan says, despite the fact that the HealthCare.gov website offers tools to help people estimate their out-of-pocket costs. So, how can you avoid a surprise on the back end? What do you need to know about your health insurance plan before you sign on the dotted line?

How much coverage do you really need?

Counihan says the first thing you should do is think back over the past 12 months. “One of the best things you can do is consider summarizing past medical history to determine your expected health care utilization. Are there procedures that you expect to have this year? Do you have a chronic illness? If you’re exceptionally healthy, that might direct you to make a much different choice in your plan.”

Read the fine print—yes, all of it

Once you’ve determined how much coverage you’ll need, curl up and get familiar with your health insurance. Read the fine print. Here, we highlight eight of the most important things you need to know about your plan.

Summary of Benefits and Coverage (SBC). Consider this is your “one-stop shop” for what you need to know about your benefits.

It’s an easy-to-read summary (typically a few pages in length) of your plan. It lets you compare how much you’ll pay for services if you use doctors or hospitals within your network versus those outside the network. And, it tells you when specific benefits take effect (for example, there may be a waiting period before some procedures are covered).

You’ll find this summary when you shop for coverage on your own or when you change or renew coverage through your job or HealthCare.gov. You can even call your health insurance provider and ask them to send you one.

Deductible. This is the amount of money you must pay out of pocket before your insurance company will cover any of your medical bills. For example, if your deductible is $500, your insurance will only kick in after you’ve paid $500 for services you received.

Premium. You pay this amount to your insurance company every month—even if you don’t see a doctor. Is it a good idea to pick a plan with the lowest monthly premium? Not always. Remember, a low monthly premium might sound good, but you’ll likely pay for it on the back end—with higher deductibles and out-of-pocket costs.

Copay. This is a fixed amount you pay each time you see a doctor or specialist. Your doctor’s receptionist will collect this fee when you show up for your appointment. Some health insurance plans have no copays.

Coinsurance. The percentage of your medical costs you must pay. For example, say you sign up for a plan that’s 80% insurance / 20% coinsurance, or 80/20, for short. If you have to have a CT scan that costs $1,000, you’ll pay $200 (20% of the bill). Your insurance would pay the remaining 80% ($800). This is separate from your deductible.

Out-of-pocket costs. This is the total amount of money you spend each year for health care. It includes your premium, deductible, coinsurance, and any money you spend on prescriptions, tests, and copays for doctors’ visits.

Out-of-pocket-limit. This is the absolute maximum amount of money you’ll pay out of pocket in one 12-month period for all of your combined medical care—deductible, coinsurance, and copays (note: It doesn’t include your premium).

In-network vs. out-of-network costs. Every health insurance plan has a network of doctors, hospitals, specialists, labs, and pharmacies that are under contract with the insurance company. That allows them to provide care for you and your family at a specific price.

Here’s how it works: When you use a provider that’s in your network, you pay lower costs. When you go outside the network, you pay more. You can find a list of in-network providers by visiting your health plan’s website, or by calling your doctor directly.

Health insurance can be confusing, but don’t let it intimidate you. Take your time to get to know your plan, the benefits it provides, and what your responsibilities are as the insured party. Knowledge is power—and when you get to know your plan, you can feel truly empowered about your health care.

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