Health Insurance: Conquer the Costs By Being Proactive
April 13, 2021
How learning about your health plan and prevention strategies can reduce what you pay for care.
Health insurance and the overall cost of healthcare represent a major expense for most American families. According to research from the Kaiser Family Foundation, the average cost of an employer-sponsored health plan in the U.S. includes $6,015 in annual insurance premiums and nearly $1,300 in out-of-pocket costs every year.
If this scenario sounds familiar, it's time to learn how to make the most of your healthcare coverage. Understanding your health insurance policy and how it works can help you and your loved ones stay healthy. Accessing preventive services and other types of care can reduce the risk of chronic disease, lowering your lifetime healthcare costs. Get started with this guide to the true cost of healthcare to make your policy work for your wellness needs.
What's the Word? Key Terms for Healthcare Costs
Before we delve into the cost of healthcare, you need to know some important terms that influence how much you pay for coverage and when you make those payments.
First, your premium is the amount you pay for your policy. If you get insurance through the healthcare marketplace in your state, you will pay your premium directly to the insurance company that provides your policy. If you have healthcare through your employer, you probably have your share of the premium withheld from your paycheck while the company shoulders the rest of the premium cost.
The deductible is the amount you must pay out-of-pocket before the insurance company begins covering your healthcare costs. Most policies have both per-person and per-family deductibles to meet every year before your insurer begins to share medical expenses. The deductible does not apply to preventive services like well visits and vaccines, which you can access for free.
To understand how much of a specific treatment or appointment will be covered by your health plan, you need to know the coinsurance amount for your policy expressed as a percentage of the total cost. For example, if you need a diagnostic test that costs $300, and your coinsurance is 30%, you have to pay $90, and your insurance will cover the rest.
Finally, a copayment (or copay) is a designated out-of-pocket amount for specific services. You might have a $25 copay for doctor visits, a $50 copay for specialists, and a $100 copay for emergency room visits. In most cases, the provider collects the copayment at your appointment in lieu of coinsurance or a deductible.
What's Your Type? Common U.S. Health Plans
To determine what type of health plan you have, consider whether you receive coverage through your state marketplace or through your employer. The federal health insurance marketplace establishes four levels of coverage that differ based on how much you pay when you need medical care and how much is covered by your insurer:
Bronze: You pay 40% of your care costs but have the lowest monthly premiums.
Silver: You pay 30% of your care costs and have a moderate monthly premium.
Gold: You pay 20% of your care costs and have a higher-than-average monthly premium.
Platinum: You pay 10% of your care costs in exchange for the highest monthly premium.
You can choose a healthcare plan from the marketplace depending on whether you prefer a higher premium with a low cost of care when you need it or lower monthly payments but a higher out-of-pocket cost when you receive care.
Employers offer various types of health plans depending on factors like employee demographics, the size of the business, and the cost of group coverage. Understanding your medical bills requires you to identify the exact plan your company offers. These are some of the most common options:
Preferred Provider Organization (PPO)
PPO plans offer the freedom to choose the primary and specialty care providers you want to see without a referral or the need to stay within a network of doctors. However, you typically pay less to see in-network providers than you do if you decide to go out of your designated network. You may also have to pay for your care upfront and file a claim for reimbursement if you see an out-of-network doctor.
Health Maintenance Organization (HMO)
HMO insurance requires you to see only in-network doctors and visit only in-network hospitals and medical facilities. The plan will not cover care you get from an out-of-network provider or location. With an HMO, you choose a single primary care doctor from the network to manage your healthcare needs. If you need specialty care, they must refer you to the appropriate provider. Most HMOs require coinsurance and/or copayments, while some also require a patient deductible.
Exclusive Provider Organization (EPO)
This type of health plan blends aspects of the HMO and PPO options. As with a PPO plan, you do not need a referral to see a specialty care provider. However, like HMOs, EPO plans do not offer any coverage or reimbursement for your care if you go out of network.
Point of Service (POS)
Another hybrid of the PPO and HMO structures, a POS plan also centers on one primary care provider who manages your care. While you need referrals to see specialists, you can receive partial reimbursement from a POS insurance plan if you go out of network.
Any of these plans could also fall into the category of a high-deductible health plan (HDHP). This type of coverage is associated with high out-of-pocket costs, often requiring the policyholder to spend several thousand dollars on healthcare before insurance takes over. HDHP members can enroll in a tax-free health savings account (HSA) to help pay medical bills until they meet the deductible.
Case Study: Healthcare Spending With Type 2 Diabetes
Along with heart disease and stroke, type 2 diabetes is one of the most costly chronic diseases in the United States. According to research from the American Diabetes Association, those who have type 2 diabetes spend about 230 percent more on healthcare every year than those who do not have the disease. The ADA also reports that the U.S. spends an average of $327 billion every year on costs associated with diabetes, including expenses associated with disability and common complications such as high blood pressure, cardiovascular disease, nerve damage, kidney disease, and blindness.
An ADA study published in the March 2018 edition of the journal Diabetes estimated that the average person with type 2 diabetes spent $9,601 on medical care related to the disease in 2017—a 26% increase compared to 2012. Assuming that the cost of healthcare has continued to increase at the same rate, a person who has type 2 diabetes can expect to pay about $12,097 in medical bills in 2022, including approximately:
$3,629 for inpatient hospital care
$3,629 for medication to treat type 2 diabetes and complications stemming from the disease
$1,815 for diabetes supplies
$1,573 for copayments and doctor visits
$1,451 for other diabetes-related medical costs
Stay Well and Save Money With Prevention Strategies
While these costs and complications of chronic illness may sound dire, the Centers for Disease Control and Prevention reports that Americans can avoid type 2 diabetes and other chronic illnesses with these preventive strategies:
Getting at least seven hours of sleep each night. Healthy sleep habits can reduce the risk of diabetes as well as obesity, heart disease, and depression. (COST: FREE)
Scheduling a body composition scan so you can fully understand your risk factors for chronic illness. The DXA scan and BOD POD tests provide an in-depth analysis of your fat, muscle, bone, and tissue mass to inform your fitness efforts and measure progress over time. (COST: Approximately $100 to $500 per scan depending on geographic location)
Being screened for chronic diseases as recommended by your doctor. For example, the CDC recommends that people at risk for diabetes have an A1C test, glucose tolerance test, or fasting blood sugar test. (COST: FREE if you meet the coverage requirements for preventive care from your insurance provider)
Having a comprehensive blood work panel to understand and manage your chronic disease risk. This type of test offers information about your blood glucose, cholesterol levels, nutritional profile, vitamin deficiencies, organ function, and hormone levels. (COST: Approximately $195)
Exercising for at least 150 minutes a week if a doctor says it's safe for you to do so. Every little bit helps, so you can spend 30 minutes taking a brisk walk around your neighborhood one day and 30 minutes doing yard work the next. As a bonus, regular exercise boosts your metabolism so you'll burn more disease-causing fat at rest. (COST: FREE)
Eating a healthy, low-fat diet. The CDC says that losing just 5% of your body weight can reduce the risk of developing type 2 diabetes if you are overweight. Stick to reduced-fat dairy, lean protein sources, whole grains, and lots of fruits and veggies. (COST: FREE)
Taking advantage of your company's wellness program, if available. Many employers append their insurance plans with perks like Peloton bikes, Apple watches, and gym memberships, as well as incentives for participating in fitness programs. (COST: Often included with the premium cost of an employer health plan)
As you can see, prioritizing prevention can potentially save you thousands of dollars a year in healthcare costs while dramatically improving your quality of life. While you probably already know your body mass index (BMI), getting more detailed information from a body composition scan such as DEXA can set you on the right track to maintaining a healthy weight—a cornerstone of disease prevention.
References:
https://www.kff.org/health-costs/report/2019-employer-health-benefits-survey/
https://www.healthcare.gov/choose-a-plan/plans-categories/
https://www.healthcare.gov/blog/understand-health-insurance-definitions/
https://www.webmd.com/health-insurance/types-of-health-insurance-plans
https://care.diabetesjournals.org/content/early/2018/03/20/dci18-0007
https://www.diabetes.org/resources/statistics/cost-diabetes
