09 Sep 2016

Differentiating Health Plans

Differentiating Health Plans

As a result of the Affordable Care Act, every major medical insurance plan for individual and for small groups was given different designations depending on their “actuarial value.” These designations were bronze, silver, gold, and platinum and collectively they are known as metallic health plans.

What’s Actuarial Value?

Actuarial value is the percentage of the medical cost that the insurance will cover. Here’s a list of how they stack up:

  • 60%
  • 70%
  • 80%
  • 90%

How Does It Work?

The percentage comes into play once your medical and health expenses reach your deductible amount. It doesn’t apply once you reach your out of pocket maximum, which is the most money you’ll pay out for your medical expenses for a given year. This doesn’t count the premiums and any expenses that the plan doesn’t cover, such as any cosmetic surgery. But your deductibles, copays, and coinsurance will be part of the out of pocket maximum, which is $6,850 for individuals and $13,700 for family coverage.

If you have a Bronze plan with a deductible of $5,400 and premiums of $223, and you get into a car accident where total medical expenses were $5,000 then you would have to pay for everything yourself.

But what if the bill totaled $6,000? You would pay for the first $5,400 (your deductible), which then leaves a balance of $600.  On the Bronze plan, your insurance would cover 60% of that balance ($600 x 60%= $360), and you would be responsible for the remaining 40% ($600 x 40%= $240. Your total out of pocket expenses would therefore be $5,640 ($5400 + $240), which is still short of the out of pocket maximum.

If the bill had amounted to $10,000 then you would first have to pay $5,400 (your deductible), which leaves a balance of $4,600.  Your plan would cover 60% of the balance ($2760) and you would be responsible for the remaining 40% ($1840). However, your total bill would then be at $7,240 which is greater than the out of pocket maximum. Therefore you would just have pay the $6,850 and the insurance company would be responsible for the rest. The same is true if the total bill is for $50,000 or even greater.

Different Premiums and Deductibles

Bronze plans usually come with higher deductibles, and lower premiums. On the other hand, a Platinum plan has a high premium on average but the deductibles are much lower.

Here are the averages for each of the metallic plans:

  • Premiums $223, deductible $5,401.
  • Premiums $273, deductible $2,958.
  • Premiums $321, deductible $1,254.
  • Premiums $380, deductible $509.

If you had Platinum coverage and your bill was $6,000, your deductible would be $509 leaving a balance of $5,491. Under this plan you only have to pay 10% of the balance since the insurance company pays the other 90%. You would therefore be responsible for another $549.10 making it a grand total of $1,058.10, instead of paying $5,640 under the Bronze plan. That’s  quite a difference and definitely something to consider when choosing a health plan.

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