How to Select the Type of Plan You Need under the Affordable Care Act
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The Affordable Care Act (ACA) helps consumers by pushing insurers toward greater clarity, requiring that they use a template to present easy-to-read information in the SBC. But the healthcare jargon doesn’t entirely go away.
If you’ve ever had to choose between two or more insurance plan options at work, or if you’ve ever gone shopping for health coverage as an individual, you know that deciphering insurance-speak isn’t always easy.
Here are a few basics to keep in mind regarding the broad types of private insurance plans available (both through employers and on the Marketplace). With this information squared away in your mind, you’ll be a more informed consumer whether you’re shopping for new health coverage or simply trying to decipher what you already have.
HMOs and EPOs
A health maintenance organization (HMO) and an exclusive provider organization (EPO) have a lot in common. Both types of insurance plans require that you seek healthcare within a network of providers if you want to tap into the plan’s coverage. A network refers to the healthcare providers, such as doctors, laboratories, and hospitals, that have agreed to provide their services to people with your insurance plan.
What happens if you go outside the network to get care? You’ll pay more out-of-pocket costs, possibly even the entire amount. For this reason, when you’re shopping for an HMO or EPO, you absolutely need to know whether the network providers include the doctors, lab, and hospital you’re most likely to use.
The key difference between these two types of network plans is that HMOs usually require that you get a referral if you need to see a specialist, whereas EPOs generally don’t.
PPOs and POS plans
With a preferred provider organization (PPO) or a point-of-service (POS) plan, your coverage isn’t restricted to a network of service providers. You have more freedom to choose your doctors, hospital, and so on than you have with an HMO or EPO. However, you’re still rewarded for staying within the network because your out-of-pocket costs will be higher if you go outside the network for care.
With a PPO, you’re able to get coverage for any doctor you see, even if you don’t have a referral. A POS allows you to see any in-network doctor without a referral, but if you want to go outside the network, you need a referral if you want the plan to cover the visit. Plans vary, so check with your plan before you use an out-of-network provider.
A high deductible health plan (HDHP) has a lower premium than traditional insurance. It also has a higher deductible. For example, for a family plan, an HDHP may have a $2,500 deductible, which means that if you seek any service other than the preventive care services that are wholly covered under the ACA, you’ll pay a lot of costs before your plan benefits kick in.
People using these plans may have a health savings account (HSA) or health reimbursement arrangement (HRA), to help them pay for health expenses. When you incur a qualified healthcare expense, you can pay for it (or be reimbursed) from that account. An HSA may decrease your federal tax burden for the year.
A catastrophic plan can be purchased only by someone who is under age 30 or someone who can’t find a plan in the Marketplace that costs less than 8 percent of his or her income or who can’t afford more coverage because of a hardship. Catastrophic plans can be purchased both in the Marketplace and outside of it (through an insurance agent or broker).
These plans must cover the essential health benefits required, but they feature a very high deductible (in the thousands of dollars for an individual) that applies to benefits other than preventive and wellness care and three primary care visits a year. So although the coverage provided may not differ greatly from another plan offered on the Marketplace, the amount you pay before coverage actually kicks in may be significantly different.
In 2014, the annual deductible for covered services under this type of policy is $6,350 for an individual and $12,700 for a family. After you satisfy the deductible, the plan pays 100 percent for covered essential health benefit services for the rest of the year.
As the name implies, this type of plan is essentially the bare-bones coverage you can get to support you in case catastrophe strikes (you have a bad accident or you’re diagnosed with a serious chronic illness, for example). It qualifies as sufficient coverage per the ACA because the elements of coverage are intact; you just may not ever tap into some of them because your out-of-pocket costs would need to be very high to do so.
Many people are eligible (based on their household incomes) for discounted, or subsidized, premiums and/or out-of-pocket costs if they purchase coverage through the Marketplace. However, someone who purchases a catastrophic plan isn’t eligible for those subsidies; only someone purchasing a metal plan can qualify for financial assistance.