Understanding Health Insurance: What You Need to Know to Begin the New Year, Stress-Free

Health insurance is an essential safeguard that helps individuals manage the costs of medical care. It provides financial protection by covering a variety of healthcare services, including doctor visits, mental health treatments, hospital stays, prescription medications, surgeries, and other treatments. By paying a regular premium, you enter into an agreement with your insurance provider, ensuring that you are shielded from the potentially high costs of medical treatment.

However, a common misconception is that once the new year begins, all deductibles reset, meaning individuals must start paying for services out of pocket again until they meet their deductible for the year. Understanding the basics of health insurance, including how deductibles work, can help you navigate your plan more effectively and avoid unexpected costs.

Key Concepts in Health Insurance

● Premium: This is the amount you pay regularly (monthly, quarterly, or annually) to keep your health insurance coverage active.

● Coverage: Health insurance helps pay for specific medical services, including routine check-ups, emergency care, surgery, and more.

● Cost Sharing: In addition to premiums, you may also pay part of the costs when you receive care. This can include deductibles, copayments, and coinsurance.

Key Terms to Know

● Deductible: The amount you must pay out of pocket for healthcare services before your insurance starts covering costs. There are two types of deductible as listed below:

• Individual Deductible: The amount that you as an individual are responsible for paying until your insurance takes on some of the costs.

• Family Deductible - If you’re on a group plan with family members, everyone’s payments will contribute to the deductible total. Once met, the insurance will take on a percentage of the costs for each of you.

● Copayment (Copay): A fixed amount you pay for a healthcare service, such as a doctor’s visit or prescription medication, at the time of service.

● Coinsurance: The percentage of the cost of a covered healthcare service that you pay after meeting your deductible (for example, 20% of a doctor’s visit, with insurance paying the remaining 80%).

● Out-of-Pocket Maximum: The maximum amount you will have to pay for covered health care services in a plan year, after which the insurance covers 100% of your medical costs.

● Network: The group of doctors, hospitals, and other healthcare providers that have contracts with your insurance company to provide services at reduced rates.

● Carve-out Plans: Refers to the practice of excluding specific coverage or benefits from a broader insurance policy.

● HSA: A tax-advantaged savings account designed to help individuals save money for medical expenses.

● FSA: A tax-advantaged savings account that allows employees to set aside pre-tax dollars to pay for qualified medical expenses.

In-Network vs. Out-of-Network

When it comes to health insurance, one of the most important factors to consider is whether a healthcare provider is in-network or out-of-network. These terms directly impact how much you’ll pay for services and what kind of coverage you can expect. In-network are doctors, hospitals, and other health-care professionals who have a contract with your insurance company. Out-of-network would be anyone who does not have a contact with your insurance company, leading to a higher significant cost.

A key issue to be aware of, especially when using mental health services, is the potential impact of carve-out plans. You may not realize that your mental health services are covered by a carve-out plan until after your first visit, when you try to bill your insurance. It’s crucial to ensure that your provider is in-network with both your primary insurance and your carve-out plan to avoid high out-of-pocket costs or balance billing. Additionally, remember that when using a carve-out plan, these services do not go toward your regular deductible.

Understanding Your Deductible

As mentioned earlier, the deductible is the amount you need to pay out-of-pocket for healthcare services before your insurance begins to cover a larger portion of the costs. This amount resets each year, and once you’ve met your deductible, your insurer will typically begin covering a greater share of your medical expenses. It’s important to note that not everyone’s insurance policy resets January 1st, it all depends on where you get your plans from. If you are unsure of when your plan resets, contact the member services phone number on the back of your insurance card.

For example, if your deductible is $1,000, you must pay $1,000 in medical bills before your insurance kicks in and covers the majority of future costs. However, until that deductible is met, you are responsible for the full payment of each session or service.

What Happens After You Meet Your Deductible?

Once you’ve met your deductible, your insurer will typically pay a certain percentage of your medical bills (known as coinsurance), and you will pay the remaining percentage. For example, if you have an 80/20 coinsurance, the insurance will pay 80% of your medical bills after the deductible, and you will pay 20%.

Copay Plans

Some insurance plans use a copay structure instead of coinsurance. With a copay, you’ll pay a fixed amount for each visit, such as $30 for a doctor’s visit. Some plans may require both a deductible and a copay, while others may only require a copay for certain services. If you’re unsure about how your plan works, contact the member services number on the back of your insurance card for clarification.

Benefit Estimates

At Anchoring Hope Counseling, we can provide you with an estimate for the cost of our sessions based on your insurance information. However, please note that this is only an estimate, and the actual cost may differ. We recommend that you reach out to your insurance provider directly to confirm that we are in-network and to verify the exact coverage and out-of-pocket costs for mental health services.

Planning for Healthcare Costs

It’s important to understand how your deductible, copays, and/or coinsurance work so you can plan for your healthcare expenses throughout the year. As your plan year begins, your deductible resets, and you’ll need to meet it again before your insurance covers more of your medical costs. Knowing this can help you budget and avoid surprises.

Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA)

Health Savings Accounts or HSA require a High Deductible Health Plan, also known as HDHP, to be eligible for this type of insurance. This allows for investment growth, and unspent funds can roll over to the next plan year. Some other benefits from using HSA would be tax savings, and flexibility in retirement. It is important to note that the IRS does maintain a strict guideline on what qualifies as an eligible expense.

Flexible Spending Accounts (FSAs) do not require an HDHP and can be used with any health insurance plan. While FSAs offer tax advantages, the funds may not roll over to the next year, depending on your employer’s plan. Be mindful that FSAs can’t be used to pay for health insurance premiums or long-term care.

That’s A Wrap!

Health insurance is designed to provide financial protection, but it’s essential to be proactive in understanding the details of your plan. By familiarizing yourself with terms like premiums, deductibles, coinsurance, and out-of-pocket maximums, you can navigate your health insurance with greater confidence and ensure that you make the most of your coverage.

If you need assistance understanding how your policy applies to mental health coverage, please contact us at Anchoring Hope Counseling. We are here to help you navigate your insurance coverage and ensure you have the support you need to thrive this year!