Prepared by REV Media Marketing LLC March 2010

The Price and Cost of Health Insurance

Why You Need Health Insurance

How Health Insurance Prices Are Determined

Your medical history, current health, and lifestyle choices influence

your costs for health insurance.

Pre-existing conditions like chronic illness or diabetes can increase

your premiums and may also be subject to “waiting periods” before

you benefit from coverage.

Lifestyle choices such as smoking will increase your premiums.

If you want lower premium payments, opt for high deductible plans.

Choose a co-payment plan – the premium is lower but you pay a

percentage of costs for services you receive. Consider the monthly

premium costs along with additional out-of-pocket expenses for care.

Factors Affecting Insurance Premiums

Insurance companies employ actuaries who calculate the framework

for determining insurance premiums.

Underwriters will calculate your particular premiums based on a

variety of factors including your health status and history, lifestyle

choices, and age.

More Factors Affecting Insurance Premiums

In addition, your premium costs will vary based on several coverage variables:

Deductible amounts – your insurance deductible is a set amount that you must pay out-of-pocket before receiving any reimbursement of expenses from the insurance company. Many insurance companies offer high deductible plan options, which will likely lower your monthly premiums.

Coinsurance – your coinsurance amount is a percentage of costs that you pay for covered services. For example, if you choose an “80/20 plan,” then your insurance company pays 80 percent of the covered expenses and you are responsible for 20 percent of the covered costs.

Co-payment—a co-payment (co-pay) is a dollar amount that is your responsibility and it is typically applied to items such as doctor office visits, emergency room visits and prescription drugs.

Out-of-pocket maximums – An out-of-pocket maximum is the dollar limit that you will be responsible for during the course of the policy term. This amount typically includes deductibles, co-payments, and co-insurance but not premiums.

Lifetime maximums – this is the maximum amount your insurance company will pay in your lifetime for your policy.

Why Are Insurance Costs Rising?

Economists tell us that rising health care costs directly correlate with

significant drops in health insurance coverage.

A study by Harvard University researchers showed an average out-

of-pocket medical debt of $12,000 for individuals who filed for

bankruptcy. The study also found that 50 percent of all bankruptcy

filings were partly the result of medical expenses.

Every 30 seconds in the United States someone files for bankruptcy

resulting from the aftermath of a serious health problem.

Medical expenses can lead to housing trouble. Many consumers

can’t pay their mortgage or get credit approval due to outstanding

medical debt.

Source: National Coalition on Health Care (NCHC)

Do You Understand ‘In Network’ Services?

Network coverage refers to medical services covered by a defined group

of physicians, caregivers and facilities, who are all pre-approved through

your health care plan.

When you use the services offered by the pre-approved providers you

are using “in network” services.

There are two different types of plans to choose from: fee for service

plans and indemnity plans.

Fee for service plans (HMOs, PPOs, POS plans, and EPOs) have

negotiated agreements with specific doctors, hospitals and health

providers. Fee for service plans typically involve the insurance company

directly reimbursing providers for claims that you incur.  

By using the provider network for medical services, you qualify for the

special rates and range of services outlined in your policy.

With certain types of fee for service coverage such as HMOs, you’ll be

asked to select a primary care physician from a roster of doctors who

belong to the provider network.

Do You Understand ‘Out of Network’ Costs?

Fee for service plans have negotiated agreements with specific doctors,

hospitals and health providers. This pre-approved group is referred to as

the provider network.

When you use a doctor in a provider network you are using “in network”

services. For their services you inquire a lower out-of-pocket cost than if

you had an indemnity plan, which does not rely on provider network

agreements.

When you have a fee for service plan, your network of preferred or

participating providers make all decisions for your health care needs,

including—with HMOs—referrals to obtain specialized medical care.

If you opt to go outside the network for medical services, you will likely

be responsible for part or all of the associated fees for the service,

regardless of whether or not you have reached your in network out-of-

pocket maximum.

What Are UCR Expenses?

Health insurers use Usual, Customary and Reasonable (UCR) expenses

to determine reimbursement rates and to prevent doctors or hospitals for

overcharging for services. UCR costs reflect the average total costs for

medical services or doctor visits. UCR refers to:

Usual: The usual fee is the cost of services regularly charged to all

patients for a specific type of service. The fee can change if the patient

makes an appointment to be treated for one condition, but complains of

other problems that must be addressed during the visit.

Customary: A customary fee is comparable to fees charged by health

care providers offering the same services and who meet the same criteria

for comparison.

Reasonable: A fee is considered reasonable when it meets both the

usual and customary criteria. A reasonable fee may also be determined

on a case-by-case basis by the insurer.

Ways to Trim Health Care Costs

Comparison shop for tests. Costs for tests can vary greatly between

different facilities, so taking the time to research can pay off.

Haggle over the hospital bill. Hospitals may be willing to reduce an

account balance if the patient can demonstrate that the payment of a co-

pay or deductible is a hardship. If you don’t ask for it, you won’t get it.

Eliminate unnecessary follow up appointments. Question whether or not

you need a follow up appointment or if it can be handled with a simple

phone call.

Inquire about less expensive prescriptions. When prescribed a name

brand prescription, ask if a generic will suffice.

Talk prices directly with your doctor. If you are experiencing financial

hardship, talk directly with your doctor about getting a reduction in your

bill.

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