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Teplitz Financial Group

Understanding Health Insurance

As we head into a Presidential election year, it is likely that your news feed is going to be filled with scare tactics about health insurance. The polarization on this topic is real, with hysteria evenly spread among left-leaning and right-leaning news sources. Solutions range from the total repeal of the Affordable Care Act to Medicare for All, and whether you choose to admit it or not, your politics (or the source of your news) probably inform your idea of what solution for the country, writ large, the country needs.

While we continue to argue about national policy, it is important not to forget your person health insurance needs. With the turn of the year around the corner, and open enrollment under way for the Affordable Care Act, now seems like a good time to think about some of the inner workings of your health insurance options.

Plans with higher premiums don't cover more medical services. The Affordable Care Act outlines a set of ten categories of essential health benefits that must be covered by all plans. These include preventative and wellness services, inpatient and outpatient hospital care, prescription drug coverage, pregnancy and childbirth, mental health services, and more. From Bronze to Platinum Plans, ALL on and off-exchange health care plans cover these services. The differences are in cost share. In a Bronze Plan you are going to pay more for services rendered. Meaning if you need doctor services, you will have a larger bill because your cost-share is higher. In a Platinum Plan, you will have little to no cost-share from doctor services, but your premium will be substantially higher.

Co-pays and co-insurance are not the same. For years, consumers have thought these two popular cost-share methods were distinctions without a difference. Well, they (and you, if you thoughts that) were wrong. A co-pay is a predetermined rate you pay for health care services at the time of care. The $25 you pay every time you see your primary care physician or $10 copay for each monthly medication, for example. Co-insurance, on the other hand, is a percentage of the overall bill, that you are responsible for (typically) after your deductible is met. Generally  you are on the hook for 100% of the bill until you meet your initial deductible. After that, your share is the co-insurance percentage. So if you have a $1,000 medical bill you are on the hook for $200. That stays in effect until you meet your out of pocket maximum, which is when the insurance company pays 100% of your medical bills (i.e. the best time to break your arm).

Short-term health insurance plans are bad. Very bad. In 2017, Republicans in the Senate kept a long-standing promise to get rid of the ACA's individual mandate, which they did as part of the Tax Cuts and Jobs Act. In essence, the elimination of the individual mandate took away the penalties for not having coverage which had previously been in effect. The idea was to loosen regulations around non-ACA compliant short term health insurance plans so consumers could "choose the plan that works for their family." Unfortunately, that is just political speak for a health insurance plan with less coverage, more restrictions, and out of pocket maximums that become a drop in the bucket following a serious illness. Don't get me wrong, I understand why the lower premium is attractive. But the cost of that lower premium could be catastrophic, meaning these plans should be avoided unless absolutely necessary.

Health Savings Accounts are good. Very good. Not all health insurance plans are eligible for Health Savings Accounts, but if yours is, you should be taking advantage of it. An HSA has the good features of a Flexible Spending Account (pre-tax contributions and tax-free distributions) without the onerous "use it or lose it" policy. Indeed, if eligible, you can build up a savings account to cover future health insurance needs and get a tax deduction for doing it. For 2019, an individuals can contribute $3,500 pre-tax while families can contribute $7,000 in the same manner. It is also important to remember that you do not need to be eligible for an HSA in order to use the funds in the HSA. If you move to a plan that is not HSA eligible you can use funds that have accumulated without penalty. You just can't make new contributions. That said, it seems likely that eligibility for an HSA is going to increase over the coming years. With rising health care costs it seems like an easy way to make a small impact for millions of health insurance policy holders.

Remember to be thankful for your workplace benefits. Most people reading this article are among the 54% of health insurance policy holders who receive benefits from their employer. This means that most among us receive a better health insurance plan at a lower cost than those who are not as fortunate. That within itself, is something to be thankful for and an important benefit to think of as part of your compensation. I know the benefits may not be as great as it used to be and that you may spend what feels like an outrageous amount on medical bills. But your employer is helping. Some of the provisions within your plan (like out of network coverage) are typically only available to workplace plans. Your premium is lower than those without workplace benefits simply because of the number of people covered, not to mention any subsidy your employer is providing. On your worst days, remember that there are people out there whose plans cost tens of thousands of dollars in premium with a deductible north of $3,000. And while you may be thinking that all of those people can afford would be wrong.

There is no question that health care is one of the most significant issues facing this country. It has been for more than four decades and likely will be until well after the 2020 Presidential election. We will all have times when we rely on our health insurance coverage for support, and our personal experiences in that realm are usually the driver behind what we think is best for everyone. There are people for whom a reversion to a totally free market system would be most effective. There are people for whom the Affordable Care Act is most effective. And there are people for whom Medicare for All would be most effective. The only thing that is guaranteed is that NO solution will be most effective for all 325 million people in the United States.

As each of us advocate for what we believe to be the best direction for national policy, it is important to remember that this is one issue we all have a personal stake in. And no matter what happens, we must continue to make the best possible decisions for our family?which starts with understanding our current insurance coverage and how to make the most of the options in front of us.