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California Health Insurance
guide:
Introduction
Doctor Networks
Monthly Premium
The Big Bill
The Small Bills
Prescriptions
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1. Introduction to
California health insurance
Okay...so you've visited
countless websites, received
instant
health
insurance quotes and colorful
benefit descriptions with enough
small print to make you
scream...WHAT DOES IT ALL MEAN
(and who writes this stuff)!!!
Well we didn't write it but
after years of reading it, we
have boiled down the various
plans to 5 key elements...and if
you understand just these
points...you will be able to
walk into the
California health insurance
market with confidence (and a
fair amount of sanity left).
So before we get started, let's
list the 5 points:
1. Doctor doctor...which
doctors you can see and how that
access is handled
2 Premium premium
premium...are people
paying too much to
over-insure the small bills??
Let's see.
3. The Big What-if...the
real reason you are
buying health insurance...big
bills
4. Pennies on the
Nickel??...from the doctor
visit to the broken leg -
getting the real story on the
small bills
5. RX dollars...California prescription
coverage going up up up
Now granted, there are tweaks
and twists between the plans,
but with the above 5 points, you
already have 90% of it...the
other 10% you can ask us.
So let's get started. HMO, PPO,
EPO...what does it all mean. We
will take a good look at what
they are but more
importantly...how they affect
your care. Let's take a closer
look...
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2. Understanding
the
California
insurance
network - HMO, PPO, EPO and how
it affects you.
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HMO...PPO...EPO??? What does it all mean. Well... rather than give you the long version of each term, let's get to the heart of what each is, and more importantly, how it affects you.
First a stroll down medical memory lane. Up until the mid 80's (wow...last century), California health insurance was pretty straight forward. You can go to any doctor and the insurance company is going to pay a certain amount. It was around this time however, that they came up with "managed care". And voila, terms like HMO, PPO, and EPO made their entrance. Well what are they?
They are essentially volume discounts.
In order to control health costs, the insurance company went to doctors and said, "Look. If you join our PPO, we'll bring you a lot of customers (us the insured) but we want you to discount your costs 30-60%. That $100 doctor visit should be $60. And if you join our HMO, we'll pay you $50/month for each person who signs up with you. In turn, there will be a lot of people to make up for this discounted amount.
Now there are variations in a contract between insurance companies and doctors, but essentially, they are offering volume discounts to help contain medical cost inflation...and it worked!! From the early 90's to about 1997...all was relatively calm on the insurance premium front. We may have reached the extent of what managed care can do as premiums have risen significantly since 1998.
Now that we have a behind-the-scenes view of what HMO, PPO, and EPO are from a doctor point of view...how do they affect us??
First let's break each one down.
If the old way (Fee for Service) was that you can go to any doctor you wish, then the HMO (Health Maintenance Organization) is the polar opposite. You choose one doctor up front, and essentially all care is managed through that doctor and with a local hospital and medical group. This doctor is referred to as a Primary Care Physician and he or she makes most decisions on care and/or referral to quotes. The trade-off with this highly structured system is that the benefits are very rich...i.e. low out-of-pocket expense when you get sick or hurt. Some people swear by it...others swear at it. It works for people who are flexible and want low-out-of-pocket expense. You typically do not find HMO's available in rural areas...because remember, they need lots of people to make it work.
Back to our spectrum, the PPO's (Preferred Provider Organization) are somewhere in between the "go to any doctor" method of the past and HMO's "choose one doctor/hospital". There is an extensive list of doctors and hospitals in California from which you can go to. You refer yourself out to quotes and you are not locked into one area or one doctor. You receive the negotiated rates (30-60% discounts mentioned above) with a PPO plan which can amount to significant savings. That being said, you will help pay along the way...either in the form of a percentage or a deductible (we'll get into these in section 4). Now with PPO's, you can go to doctors who are not in the network but then your benefits are significantly reduced. Why?? These doctors are not offering the "volume discount" we mentioned above.
Another variation not as often seen is an EPO (Exclusive Provider Organization). An EPO has the exact same doctors/hospitals as the PPO list but with no out-of-network benefits. If you go to a doctor not listed on the EPO list, you have no benefits.
Some more interesting facts for California health insurance:
In a true emergency (and be very conservative on this definition...it better be serious!!), your benefits will likely cover you even out of the above networks.
Sometimes doctors participate in HMO and PPO...sometimes just one of them. You can verify your doctor's participation here under "provider".
This HMO or PPO question is really the big one to answer first if possible. You can always ask us to explain further the differences between the two.
Next...Premium premium premium. Just like real estate, it's critical when choosing a plan. But don't assume that a more expensive plan is necessarily better for you. Let's take a closer look...
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3.
Premiums...the amount you pay each month to keep
the policy in effect...but there's more |
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Such a loved topic...health
insurance premiums. Just the
thought can raise blood pressure
faster than the actual rates
seem to go up. Let's take a
closer look and find out why an
expensive plan might not
necessarily be the right plan.
It is a pretty straight forward
contract...as long as you pay
the premiums...the insurance
carrier will cover you, but what
exactly are we paying for?
Before we take a look at big
bills and small
bills...etc...you need to
understand a fundamental truth
about
health insurance.
If you are getting great
benefits for the smaller
bills...believe me...you are
PAYING FOR IT. It's the
equivalent to buying a car
warranty that also covers a
weekly car-wash, oil change
every 3,000 miles, and a new set
of tires every two
years....sounds great but the
cost would be so high...no one
could afford it!! Health
insurance is very similar...
A simple example (real life)
will help explain this.
Let's say you have a
PPO
High-deductible at $47/month
that mainly covers the big
bills...any small stuff will be
your responsibility. Compare
that to a 30% PPO plan for
$167/month that will cover right
away...leaving you to pay 30%.
That means your doctor visit is
going to be pretty cheap.
Remember, it will handle the big
bills pretty much the same.
Now the first reaction to our
$47 plan is..."You mean I HAVE
to pay for the doctor visits and
anything else up to $2,250???
That doesn't sound too good!!"
But let's look at it more
closely...The difference in
premium is $120/month.
That's $1,440 a year.
That's a lot of small
bills you better be having in
order to get any value out of
the more expensive plan. So
you're paying a definite $1,440
to cover a potential $2,250
expense. That's not smart
insurance. You want to pay
pennies on the dollar...i.e.
protect with $47/month from a
potential $20,000+ surgery bill.
Some other interesting facts
on premiums:
Health Insurance rate increases
tend to hit the most expensive
plans hardest. Why?? We are
now in a period of extreme
medical inflation. As mentioned
in the previous section, managed
care (HMO's and PPO's) did a
pretty good job of keeping costs
down but there is only so much
they can do and the results have
shown over the last three
years. So with this rate
increase, the plans that are
paying the majority of the bills
will feel it the most.
Typically it has been the HMO's
and No-deductible PPO's.
Sometimes, a person can save
money by splitting up policies.
For example: a family rate is
based on the average...father,
mother, 2 children. If you have
1 child and a significant
difference in age between father
and mother...it may be better to
have older spouse alone and
other younger spouse and child
together. Try the different
options or
tell us
your situation and we will find
out the best option.
Next...the real reason you buy
health insurance...The big
what-if. It sounds ominous but
a car accident can quickly add
up to $80-100,000 of medical
expenses. Let's look at how the
plans handle this big
what-if...
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4. The real reason to
buy California
health insurance...The "Big What-if"
I hear it almost daily..."I'm healthy -
what do I need health insurance for??"
The average person lands in the hospital
every seven years. Almost 50% of
bankruptcies in the U.S. are the result
of a sudden medical condition or
accident...and believe me...they were
all probably "healthy".
There is a double-edged sword in today's
medical world. Improvement in medical
technology and capability is
unprecedented with even further
developments around the corner through
new genetic advancements. All this is
great but as the capabilities increase
so do the resulting costs. The
possibility for the large medical bill
is really why you need health insurance
and this should be ultimately what your
plan protects against.
Maximum out of Pocket
Most plans handle this Big What-if or
catastrophic
health coverage with
a "maximum out-of-pocket", quite
possibly the most important part of
your medical plan.
It basically means, if you have a big
bill (or a series of bills) when does
the plan pay at 100%. Of course, this
maximum applies to in-network (see
Section 1 Doctor doctor) and for covered
benefits. It usually applies to a
calendar year, from January to December
after which it is reset. Typically, the
Maximum includes deductible (we'll talk
about the deductible in the next section
- small bills).
For a simple example...
You have a $2,250 deductible and then a
10% co-insurance up to another $500
maximum. The unforeseen "what-if", a
car accident occurs with $80,000 of
covered, in-network medical bills.
After you have paid $2,750 (your $2,250
deductible and $500 max), then the
insurance carrier will pick up the rest
of the bills according to your covered
benefits.
An interesting fact...
Sometimes plans have great benefits for
smaller bills but the "back-end",
meaning the big bill is not as good.
What good is a $45 doctor office visit
copay if you have to pay $5,500 for a
big bill?!? Remember, this "back-end"
is really why you are buying health
insurance. If you are getting better
benefits for the small bills...guess
what...you are probably paying for it in
your monthly premiums. That being said,
let's look at how the plans handle the
small bills.
Pennies on the nickel?? Understanding
how plans treat the smaller bills from
doctor visits to minor surgery...
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5. Pennies on the
nickel?? Insight into
how insurance plans
handle the
smaller bills. |
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Now
small
bills
basically
refers
to
everything
up to
your
maximum-out-of-pocket
(see
Section
3 - Big
Bills).
There
are
different
ways
each
plan
handles
these
expenses
so lets
explore
them and
more
importantly...their
costs to
you.
Up to
your
maximum,
each
plan
handles
smaller
bills in
one of
three
ways.
By small
bills,
we mean
everything
from
your
doctor
visit
charge
to minor
surgery...essentially
what
falls
below
your
maximum
(because
it goes
100%
after
that
anyway!!).
Let's
first
understand
what
these
terms
are, and
then
really
understand
how much
it costs
to have
the
bells
and
whistles.
Deductibles,
Copays,
Co-insurance.
A
deductible
is
an
amount
that you
will pay
100% of
before
the plan
starts
to pay.
Think of
if as a
pool of
money.
Once you
have
spent
your
pool of
money
out of
your
pocket,
the
insurance
then
starts
to kick
in.
This
amount
is
usually
in a
calendar
year,
January-December.
Sometimes
there
are
separate
deductibles
for
specific
care
such as
maternity.
Now
remember,
if you
are
in-network
i.e. you
are Blue
Cross
and the
doctor
is a
Blue
Cross
doctor,
then you
will get
30-60%
off
because
of the
negotiated
rates.
Let's
look at
an
example...
Doctor
visit is
$100.
Because
you are
Blue
Cross
PPO and
doctor
is Blue
Cross
PPO,
then
this
charge
may drop
to $60.
You pay
this $60
and it
applies
to your
deductible.
This
negotiated
rate is
a great
benefit
even
before
you have
met your
total
deductible.
Now out
in the
market
today,
they
primarily
have
what's
called a
high
deductible
plan
(from
around
$1,000
to
$3,000)
which is
for the
person
who is
really
worried
about
the big
what-if
and
wants to
keep
their
monthly
premiums
down. A
great
example
of this
is the
Health
Savings
Account
plan
which
has
special
tax
advantages
for the
self-employed
and
small
group.
A
Copay
is
simply
an
amount
you pay
for a
given
service.
For
example,
a $40
copay
usually
means
you will
pay $40
for the
doctor
consultation.
Keep in
mind
that
additional
services,
i.e.
labs,
x-rays,
etc...will
have
additional
costs.
Sometimes
there
are
copays
on
specific
services.
For
example,
ambulance
or
emergency
room
visit
might
have a
copay.
Co-insurance
refers
to a
percentage
you will
pick up
for
services.
For
example,
a 30%
plan
means
that you
will pay
30%
(insurance
will pay
70%) of
the
negotiated
rate.
For
example
on a 30%
plan:
minor
surgery
$1,000
negotiated
rate
$ 700
30%
coinsurance
$
210
(30% of
$700)
In this
case,
in-network
for a
covered
benefit,
you
would
pay
$210.
These
are
essentially
the
three
ways an
insurance
plan
handles
the
smaller
bills.
deductible
You
pay 100%
up to a
certain
amount
co-insurance
You
pay a
percentage
up to a
certain
amount
copay
You
pay a
fixed
amount
for a
certain
service
That
"certain
amount"
above is
typically
your
maximum
out of
pocket.
Now that
we know
how a
plan
handles
the
small
bills,
let's
understand
what it
will
costs
us.
Obviously
the
co-insurance
in nice
because
you have
"first
dollar"
coverage
meaning
the
insurance
company
will
help pay
with
your
first
bill.
That
being
said...you
don't
think
they
will do
it for
free do
you?
This is
critical.
Let's
look at
an
example.
35 yr
old,
Riverside
County,
good
health
$2,500
Deductible
PPO
plan
$85/month
HMO
plan
$219/month
Now with
the
first
plan,
you have
to meet
a $2,250
deductible...translation,
this is
mainly
for the
big
bill.
You'll
get
negotiated
rates
but all
the
small
stuff
will
fall on
your
shoulders.
Now the
other
plan
will
start
paying
70% from
your
first
bill...very
nice
right??
But wait
a
minute...we
are
paying
an extra
$134/month
for that
first
bill
coverage.
They
both
handle
the big
bill
about
the same
(max is
about
the
same).
$134/month
is
$1,608
per
year!!
That
almost
makes up
for the
deductible
amount
in one
year!!
Paying a
guaranteed
$1,608 a
year to
save a
potential
$2,500
per year
is not
good
insurance
and you
would
need a
lot of
small
bills to
make it
worth
$1,608.
Remember,
you want
to pay
pennies
on the
dollar...not
pennies
on the
nickel.
Paying
$85/month
to
protect
against
a
$20,000
surgery
is smart
insurance...pennies
on the
dollar.
Now for
those
people
that
absolutely
want
first-dollar
coverage...great...you
can have
it.
Just
keep in
mind the
above
example.
Also,
over the
last
three
years
health
insurance
has been
hit by
significant
rate
increases.
Guess
where
they
typically
hit
hardest...Co-insurance
and
HMO's.
Now that
we feel
pretty
good
about
the
doctors,
big bill
and
small
bill
coverage
let's
look at
prescriptions.
With
brand
name
prices
increasing
20% a
year
recently,
it is
important
to see
how a
plan
handles
this....
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6.
How plans handle what is increasingly
the most costly part of visiting the
doctor...prescriptions |
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Brand name prescriptions
have been increasing 20%
per year and despite the
political
rhetoric...that's
probably not going to
change for a while.
In case you have been
away the last couple of
years, pharmaceutical
companies have changed
the way they market
their products. It use
to be that they would
primarily market through
the doctor...a "push"
method. Now, with huge
advertising campaigns,
they are advertising
directly to you, the
consumer in the thought
that you will then go
and request that
medication from your
doctor...the "pull"
method. Guess
what...there is a cost
to all this and you want
to make sure your plan
covers it.
Most insurance plans
handle prescriptions
with a copay, a
fixed amount you pay.
Typically, there is a
different copay amount
for brand name and
generic stemming from
the situation I
mentioned above. Across
the board, you usually
find a $10 generic copay
and a $25 brand name
copay but make sure to
check the policy...it
might be different.
They also talk about
Fomulary vs.
non-formulary.
Formulary simply means
that the company
recognizes the drug as
being effective and
therefore covered. In
all our years, we have
yet to have a problem
with a person receiving
a prescription that was
non-formulary.
A recent change which we
feel will probably
become the trend is to
put a deductible on
brand-name
prescriptions. This
basically says, "Try to
use generic if you
can." Why?? Well if a
month's supply of
Prylosec is $150 and a
person is paying $65
month for comprehensive
coverage...you can see
the problem. Either
rates will shoot up (as
with the last 3 years)
or something has to
absorb these costs.
That is where the
deductible comes in.
Example...All major
California health plans have
instituted varying
deductibles based on the
plan for brand name
prescriptions for their PPO plans. The other
carriers will either
have to initiate a
similar deductible or
continue to raise
monthly premiums. This
specific brand name
deductible will be the
standard.
Well we have made it
through...hopefully with
few scars and a great
deal more understanding
of how to read the
plans.
Again, there may be
specific questions you
have which we would be
happy to help you with
here.
For a final exam, go
get your California
health insurance quote
to review plans, rates,
and providers. There
will be a test
afterward...you pass
by choosing the right
plan at the right price
for you!!
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