About health insurance in the USA – some explanation.

First – some politics!

I emigrated to the USA from the United Kingdom – where we have the National Health Service – an enormous system of socialized healthcare. That system is funded through a small tax that every working person pays, and because of centralized purchasing power the cost of providing this healthcare is relatively low for the care available.

The system in the USA is quite different. There are many, many very profitable private businesses within the healthcare industry and people here have a ridiculous sense of how much healthcare services should cost. A procedure in the USA will cost several times that cost incurred in most other countries in the world (a good comparison article here). Americans will sometimes tell you that is the because of the costs of malpractice insurance in this very litigious country. Well, that is only partially true. The reality is that the government has allowed private healthcare businesses to set their own pricing and now there are many people making a very good living from this rip-off.

The situation got out of hand so people were making healthcare choices based on their ability to pay. Many could not afford to have insurance and so when a serious health issue occurred people were literally going without healthcare for treatable illnesses that led to far more serious issues. Disgraceful and sad for a country that has so much. Things got a little better recently when President Obama pushed through the “Affordable Healthcare Act” (sometimes called “Obamacare”). It is far from perfect but at least it offered an affordable option and many that had previously not had insurance are now able to afford some coverage. There is a plan to require people to have insurance and even introduce fines through payroll taxes for people that refuse to get coverage. The reason for that is because the uninsured, sooner or later, had a health issue that would end up being an unpaid bill and those unpaid bills were costing everyone else money.

OK enough politics – how does healthcare in the US work now – particularly for new immigrants.

As I mentioned, everyone is required to have healthcare. This is sometimes provided through your employer and if they offer a plan it is probably the cheapest/best option – most companies will pay for some of the cost on your behalf (at least for the employee, if not the family). You can typically upgrade your plan to cover your family.

If your employee does not offer a healthcare plan (or you just want to decline their policy) you can shop around for an “ACA” approved plan and the first place to start shopping is the healthcare.gov website – you can get quotes from there very easily without entering much more than your family size and ages, and your household income. The income is important because there is a subsidy available depending on how much you earn. As your income rises you will be getting less and less subsidy of the monthly cost. I recommend you try getting quotes to see how that will work.

When you get quotes you will see several levels such as Bronze -> Silver -> Gold -> Platinum. The higher up that scale (Bronze is lowest, Platinum is highest) , the higher the monthly cost and the greater the benefit coverage (meaning less bills should you use healthcare). Yes folks, even though you have insurance, most insurance plans will still land you with a bill if you actually use healthcare. Great huh. Let me explain some of that…

The lower cost plans have higher deductibles, higher co-pay, and so on but with a limit or cap that you will be charged. Put it simply the low cost plans (Bronze for instance) will provide some comfort if you ever have a serious health event BUT leave you paying quite heavy fees for most services. You have to realize the “full” cost of health events is stunning. A simple broken leg with no overnight stay will cost $10k to $20k plus. Stay in hospital a few hours or overnight and you can be pushing $50/60k. Serious illnesses such as Cancer will cost hundreds of thousands of dollars and long term healthcare could see bills measured in the millions of dollars.

Deductible, copay, PPO, HMO – what the heck does that all mean??? Some of the terminology explained and a real example.

The two main types of healthcare insurance are HMO plans and PPO plans.

An HMO plan provides good coverage within a controlled environment. For instance, you see a doctor, if you need a specialist they will choose one of their allowable specialists and you will get the treatments the HMO approves. This type of plan is cheaper than a PPO, but is more restrictive – you have less choice of who provides your care and what care you receive. If for instance you need a newly available cancer treatment, you may find that is not approved and therefore not covered by the HMO.

A PPO plan is more expensive, but gives you more choice in your healthcare. You can see pretty much any doctor you like and get pretty much any treatment you like, although the PPO will cover more of the cost if that doctor/treatment is on their approved list.

A Deductible is the amount you will pay before your health insurance will start to pay.

A Co-Pay is the amount you will pay on certain standard services, like a GP visit (where a deductible doesn’t apply) or on other treatments that have a deductible once the deductible is met.

An Out of pocket maximum is set for an individual and a family. This is the maximum cost you will pay for deductibles and co-pays in a year. Once you hit that the plan covers the rest at 100%.

An example plan…

So – let’s say you buy a mid range plan such as shown below.

On the silver plan, seeing your doctor will cost you $45. If your doctor sends you for a blood test, that will be $45 more. If you need to see a specialist that will cost $65, but if you then need a treatment you will pay the first $2000 of the cost and then 20% of the bill after that, until you hit your out of pocket maximum of $6250 in one year. So – a plan like this will still cost money each time you see a doctor and if you have a more serious accident you will most likely hit your max out of pocket, but at least that accident wouldn’t mean going bankrupt.

By the way, the cost of the plan above for a family of three (35, 32 and a child) in California would cost $896 per month. If the family had a household income of $60k they would get a subsidy of $395 per month, leaving the plan costing $501 per month. If their household income was $85k or above they would not get the $395 subsidy at all.

If you were to go for the more expensive plan ($1287 per month for the same example family unit), you can see how the exposure would reduce in the screenshot below. However, to be able to afford the $1287 per month your income would need to be substantially higher than the $60k household income.

Go on Healthcare.gov and get some quotes yourself…

What level of plan to choose?

Well  that is a personal choice and you have to offset the affordability of the plan with your fear over the risk of a serious health incident OR your health situation. For example, if you have kids, you know they are likely to have an injury/illness or something and you will need to see the doctor. In that case you might want a plan that will cover that risk. If you are young, in good health, maybe you can gamble and go for a cheaper plan (bigger exposure if you have an accident). If your health is poor you might want to pay a bit more each month but lower your deductible and out of pocket maximum. If you are on a tight budget, look at HMO plans rather than PPO plans.

By the way, all ACA plans allow for 1 preventative physician visit per year – at no cost. To save money you can time that visit when you have some health issue going on to reduce or eliminate your costs.

I hope that helps!