Okay, so the New Year is right around the corner and that means, among other things, that now is the time to make health insurance decisions for the coming year. With that in mind, I thought I’d review the stuff you want to know about buying health insurance in Washington State.
First Thing to Know: You Can Probably Buy Health Insurance Yourself
Assuming that you’re an educated, rational consumer (which, apparently many people aren’t), you can buy health insurance yourself on Washington Healthplanfinder. If you’re uncomfortable doing this yourself then brokers and navigators are an option, but really, it’s not necessary. The computer skills required to sign up are similar to those required for making a purchase at Amazon.com (i.e., no real computer skills required whatsoever).
However, you want to be sure to do some research on the product itself before you buy. Accordingly, if you’re an individual purchasing health insurance for yourself or your family, this article will walk you through what you need to know. And if you’re a small business owner thinking about covering your employees, I’ve included links to some helpful resources on this stuff at the bottom of the page.
Understand the Product
You want to understand some basics about the health insurance product you’re shopping for and will ultimately purchase. Accordingly, let me define the basic vocabulary you need to know, explain the “metal levels,” and then outline the various plan options you will choose from.
The Basic Vocabulary
Here are the basic terms you need to know:
Premium – This is the bill you pay every month to remain covered under the insurance plan.
Out-of-pocket costs – This is the amount you have to pay out of pocket on medical expenses covered by your insurance plan, including copays, deductibles, and coinsurance.
- Copay – A flat fee you pay for medical services or products. This amount is generally charged when you receive the service.
- Deductible – The initial portion of your medical expenses not covered by a copay and not paid for by your insurance.
- Coinsurance – The portion of your costs that you pay once you’ve reached your deductible amount. For example, if a policy has 20% coinsurance and a $2,000 deductible, then once you’ve paid $2,000 of medical costs yourself you only have to pay 20% of your medical costs. In any given policy period (usually a year), you pay coinsurance up until the point your out-of-pocket costs have reached your out-of-pocket maximum.
Metal Levels
“Metal levels” are a new classification introduced by ACA. A particular plan’s metal level describes how much on average the health plan pays vs. what you the consumer pay out of pocket. Note that “on average” means that the amount you pay out of pocket might be a little more or less when all is said and done, depending on what medical expenses you incur during the year.
| METAL LEVEL | COST DISTRIBUTION |
| Bronze | 60% paid by health plan, 40% paid by you |
| Silver | 70% paid by health plan, 30% paid by you |
| Gold | 80% paid by health plan, 20% paid by you |
| Platinum | 90% paid by health plan, 10% paid by you |
Predictably, lower metal levels have cheaper insurance premiums due to those higher out-of-pocket costs.
I should note also that there’s a fifth category, “catastrophic coverage.” This isn’t really a “metal,” but it’s a special category of coverage where the plan pays less than 60% of total average cost of care. Most people don’t qualify for catastrophic coverage; you’re only eligible for a catastrophic coverage plan if you’re under 30 or you qualify with a hardship exemption.
HMO, PPO, & EPO Plans
You should know the difference between HMO, PPO, & EPO plans. PPOs are more expensive than HMOs and EPOs, so before you buy you’ll want to understand what you’re paying for.
HMO stands for “health maintenance organization.” These plans make you pick a primary care physician, and then route all of your health care through that doctor. You only get to see another provider if either (a) your primary care physician refers you to one or (b) it’s a medical emergency. These plans tend to be cheaper, but the consumer loses a fair amount of flexibility and control in return for the cost savings.
PPO stands for “preferred provider organization.” These plans are more expensive than either HMOs or EPOs, but they give you the consumer more control and flexibility. You can go directly to a specialist if you like, and you can generally see health care professionals both inside and outside of your network (though staying in-network is generally cheaper because it reduces your copays and other out-of-pocket costs).
EPO stands for “exclusive provider organization.” These plans are a bit of a middle ground between HMOs and PPOs when it comes to cost vs. flexibility and consumer control. You can go directly to the specialist if you want, but you have to stay in network unless it’s a medical emergency.
You can see, then, how a consumer might choose between these different types of plans. If the idea of having to go through a primary care physician doesn’t bother you and you appreciate cost savings, then go with an HMO. If you dislike the idea of not getting to go directly to your preferred specialist whenever you want and you believe that flexibility is worth the extra cost, then go with a PPO. Or go with an EPO if you want something in between the two extremes.
How to Keep Your Doctor
If you already have a doctor you like, you’ll probably want to make sure that doctor is in your future health plan’s network. Washington Healthplanfinder makes it pretty easy to see which plans have your current doctor in their network. When shopping on the individual exchange, you’ll see in the upper left corner of the screen a section where you can enter your doctor’s information. Then just filter for plans that include your doctor in their network.
Understand Your Rights as a Consumer
The Affordable Care Act codified a variety of consumer rights, which you’ll want to know about as you’re looking at health insurance.
Here are some things your health insurance company can’t do, for example:
- Your insurance company can’t set an annual or lifetime limit for your coverage
- You generally can’t be discriminated against for having a preexisting condition
- You can’t be charged any out of pocket costs for medically necessary preventive health services (e.g. vaccines, routine screenings for common diseases)
- In 2015, you can’t be charged more than $6,600 in out of pocket costs if you’re on an individual plan or $13,200 if you’re on a family plan (amounts adjust each year for inflation).
In addition, your basic health insurance plan needs to cover 10 “essential health benefits.”
Understand Your Options for Financial Assistance
Consumers should know that the Affordable Care Act provides some significant financial assistance.
Premium Tax Credit
If your income is below a certain amount, you might qualify for a federal tax credit that offsets the cost of your health insurance premiums. You can apply for this subsidy as part of the process of purchasing health insurance through Washington Healthplanfinder. You can choose to either have the credit applied as a reduction to your monthly payments, or you can figure the credit all at once when you file your federal tax return.
Note: If your income ends up being higher than you forecast, you end up paying back some or all of the premium tax credit when you file your tax return.
Cost Sharing Reductions
If you purchase a silver plan through Washington Healthplanfinder, then you might qualify for cost sharing reductions based on your income. This will reduce your deductibles, copays, and coinsurance.
Washington Apple Health
If your income is below a certain amount, you might qualify for Washington Apple Health, our state’s Medicaid program. This health insurance is free. To see if you qualify, you apply through Washington Healthplanfinder (the same way you apply for a premium tax credit).
Understand the Tax Benefits of HSAs and HDHPs
Health savings accounts (HSAs) paired with high-deductible health plans (HDHPs) provide some very compelling tax benefits. And you’ll want to understand the potential benefits of an “HSA-pairable” plan before making a purchase on Washington Healthplanfinder.
Here’s the bottom line: HSA contributions reduce your adjusted gross income (AGI). This is true whether you make the contribution (the contribution is reported as an adjustment to income on your tax return) or your employer does (the contribution amount isn’t included in Box 1 of your W-2).
Several big tax benefits stem from this tax treatment. The first, most obvious, benefit of this is that when you pay for out-of-pocket medical costs through an HSA, the money spent is pre-tax. So for example, if you earn $40,000 in a year and make $2,000 of HSA contributions, you pay income tax as if you made $38,000 that year. If your employer pays you with $38,000 of wages and $2,000 of HSA contributions, it’s a similar effect.
However, you should know that there are some other more subtle benefits of using an HSA. A second benefit is this: the premium tax credit described above is based on AGI. Therefore, if you’re a taxpayer whose income is in the range to qualify for the premium tax credit, an HSA contribution might not only lower your income tax bill, but also increase the federal subsidies you receive to pay for the plan premiums.
And now a third subtle benefit: You can pay for medical costs out of an HSA even if the plan it’s linked to doesn’t cover the costs. The only rule is that the expense has to be considered a medically necessary expense under federal tax law [specifically, IRC § 213(d)]. So for example, if you purchase a basic health plan that you pair with an HSA, but don’t purchase dental or vision coverage, you can still pay for dental and vision costs through your HSA and that money is pre-tax.
For Small Businesses: Make Sure You Understand the Law
If you own a small business, establishing a health insurance plan is a bit more complicated than it is for individuals to buy coverage.
The reason for this isn’t that it’s particularly difficult to use Washington Healthplanfinder’s SHOP exchange (though you’ll want to be aware of some “quirks” of the system before you try using it). Rather, it’s because before you purchase anything you’ll surely want to consult with quality professionals to make sure your plan is even legal.
For example, if your small business establishes a health plan for employees, then the plan needs to comply with the new market reforms in the ACA. Failure to follow the rules can result in a $100 penalty per employee per day. Yes, that’s $36,500 for each employee per year. It could destroy your business to mess this up.
These issues are too much to get into for one article, but you can see our e-book on these issues for more details, or contact us to schedule an appointment if you have more questions.