What do you need to know if you have a high deductible? The first thing that you need to know is what a high deductible health plan is. And more importantly, how to pay for smaller medical expenses.
According to the Internal Revenue Service a high deductible health plan is any plan with an individual deductible of $1400 or a family deductible of $2800. But what about out of pocket expenses? The IRS says that it cannot be more than $6900 for an individual or $13,800 for a family. But the IRS is talking high deductible health plans that are designed to be sold with a Health Savings Account. My definition is a little different.
Health Savings Account Can Go With a High Deductible Health Insurance Plan But...
Your health savings account (HSA) compliant health insurance policy is a high deductible health plan. But your high deductible health plan may not health savings account compliant!
A health insurance policy that meets the requirements to be coupled with a health savings account must meet very specific requirements. One of those requirements will be that your health insurance does not provide any copays for services such as doctor visits. In addition, there are specific requirements about the minimum and maximum deductible. Plus, there are also requirements about minimum and maximum out of pocket costs.
Even if you have a plan with doctor visit and prescription drug copays, your current health insurance policy probably has a deductible of at least $3500. And your maximum out-of-pocket liability is $7000 or more. While most definitions of high deductible health insurance policies exclude any plans that include copays, I do not.
The reason that I do not exclude plans with copays from my definition of a high deductible health plan is simple. Regardless of your copays, if you have a major medical event (i.e., an appendectomy, cancer, accident) you will pay the first $3,500 before your health insurance pays anything. Then, depending on the policy, you may also pay a percentage of all other medical bills until you hit your maximum out-of-pocket limits.
What You Need to Know About Copays on Your High Deductible Health Insurance Policy
There are many high deductible health plans that will provide copays for your primary care doctor, specialists, and prescription drugs. Your plan may also include a copay for an urgent care visit. But having a copay does not mean that you should use your health insurance.
If you are going to your primary care doctor and you have a $25 office visit copay, you will want to use the copay. But if you do use your copay be aware that most health insurance policies today exclude any labs or x-rays from that copay. In the typical policy any lab work or x-rays will be subject to your deductible.
You do not want to automatically use copays for prescriptions drugs and urgent care. In fact, it is always in your best interest to become a healthcare consumer instead of an insured in these cases.
Become a Good Healthcare Consumer
If you are like most people you automatically assume that your copays will be best price for services like prescription drugs and urgent care. You may also assume that the price that your insurance company negotiated for things like an MRI, prescriptions or even outpatient surgery will be the lowest possible price. Sadly, when you have a high deductible or a copay, the negotiated charges may be higher than the cash-pay price. You must become a good consumer.
I want to share the example of a friend who needed an inguinal hernia repair in 2019. His deductible on an ACA compliant health plan was $7000. When he asked about the cost of the surgery his doctor said not to worry because his “health insurance” would pay for the surgery. After a lot of prodding, he finally was told that the cost would more than $20,000. That meant that he would pay the $7000 deductible plus additional coinsurance. After doing some research, he ultimately flew to the Oklahoma Surgery Center where the cost today is $3,060. Even with airfare for he and his wife plus a hotel room for two night his total cost was less than $4000!
Prescription drugs are another area where you must do some shopping. Recently my wife had a problem, and the doctor called a prescription into our local pharmacy. When my wife arrived, she was told that the prescription cost was $76. My wife immediately checked out goodrx.com and discovered the same drug was only $16 at the same pharmacy! She saved $60 because she knew that the negotiated rate was not necessarily the lowest cost.
Will Those Lower Costs Apply to My Deductible?
This is the tricky part of becoming a good consumer. In theory, if you have saved the insurance company money, they should be happy to let you submit your bills for reimbursement. Unfortunately, that kind of logic may not work with the health insurance company. If the provider that you used was not in your network, the health insurance company is perfectly within their rights to treat the charge as “out-of-network” and pay accordingly. And if the physicians and/or hospitals are in-network they expect to get their negotiated rates.
Still, there is a cost-benefit analysis to be made. In the case of my friend with the inguinal hernia, in the absence of complications there should be no additional costs. And assuming no other medical surprises in the same year, he would not have met his $7000 deductible anyway. So even though the expense did not apply to his deductible, he was still more than $3000 better off!
Medical Bill Negotiation
If you have a health insurance policy purchased on healthcare.gov, it is likely that your 2021 maximum out-of-pocket cost is $8,550. As I have already stated, it is likely that your deductible is at least $3,500. That means that one large medical bill can leave you with $8,550 in debt.
Do you currently have more than $8,550 in your savings account? According to a Harris Poll taken on behalf of HomeServe and written about in a June 9, 2020 MarketWatch article (https://www.marketwatch.com/story/nearly-25-of-americans-have-no-emergency-savings-and-lost-income-due-to-coronavirus-is-piling-on-even-more-debt-2020-06-03) found that 38% of Americans could not come up with $500 without selling something. The same study found that 25% of Americans had zero in savings. That is 63% of Americans who could not deal with a medical bill more than $8000.
If you fall into the category of people that could not deal with a large medical bill, you can always try to negotiate with the doctors and hospitals. And if you do not feel up to the task, there are companies that will negotiate on your behalf. Most of these companies do not require any upfront payment. These companies are generally paid as a percentage of the amount of money they save you.
A word of caution: many hospitals will refuse to negotiate if you have health insurance. Here is a great article on Medical Bill Negotiation: https://money.usnews.com/money/personal-finance/debt/articles/how-to-get-help-paying-medical-bills.
Ask About Medical Financial Assistance Programs
If you are left with large medical bills or your prescription drugs are particularly expensive, you may qualify for financial assistance. Many of the financial assistance plans are income based. As a rule, your income cannot exceed a multiple of the Federal Poverty Guidelines. Usually, your income must be less than two times the Federal Poverty Guidelines.
One of my clients takes a very expensive prescription drug. Under her health plan all prescriptions are subject to a separate prescription drug deductible. After the deductible, she must pay 29% of the cost. This client was able to find a program through the drug manufacturer that waives any copays for people with a qualified health insurance policy.
You may be able to get help in finding financial assistance programs and manufacturer coupons by visiting this website: https://www.rxassist.org/
The Non-ACA Compliant High Deductible Health Insurance Policy
If you are one of the many Americans who make too much money to qualify for premium subsidy on healthcare.gov you may have purchased a short-term policy (https://myhealthcare360.org/should-i-buy-short-term-health-insurance/). Many of these policies will offer at least one plan that includes copays. My suggestion is to ignore the plans with copays. A prescription drug copay of $25 for a generic drug is useless. The cash-pay price will always be less than the copay. A plan with $50 office visit copay for primary care is close to useless.
When buying a short-term major medical I suggest that you purchased a reasonable deductible such as $5000 or even $7500. Your short-term health insurance should then pay 100% after the deductible. For all the smaller medical bills, always ash for the cash-pay price. Ignore the fact that those smaller costs will not apply to the deductible. We know that you are relatively healthy, otherwise you would not be purchasing one of these short-term health insurance plans. And consider how much money you are savings versus an ACA compliant health insurance policy (https://myhealthcare360.org/the-affordable-care-act-obamacare-what-you-need-to-know/)