What to Look for in a Health Insurance Policy

Once you have selected some policies to analyze, look at these six major financial items in each policy:

1. Doctor Visit Co-pay or Discount. The doctor visit co-pay is the amount that you pay each time you visit the doctor. In a traditional low-deductible plan, this ranges from $10 to $30 per visit per patient. Most higher-deductible plans do not offer any doctor co-pay, but do offer substantial network discounts off the $100 or more standard doctor visit fee. When considering a plan without a doctor visit co-pay, you should phone your physician first to ask how much you will pay per doctor visit (typically 30 to 50 percent off a typical $100 fee per doctor visit).
2. Prescription Co-pay or Discount. This is the amount you will pay per prescription filled. Most healthcare plans offering pharmacy coverage break their coverage into three tiers: generic, formulary brand, and nonformulary. A typical plan for a 30-day prescription might charge a $10 co-pay for a generic drug, a $20 co-pay for a formulary-brand drug that is on a list (the “formulary”) maintained by the carrier, and a discount from full retail for a drug that is neither generic or on the formulary list. There is no standard pharmacy coverage, so the only way to know what you will pay is to ask your carrier or look up your prescription on its web site.
3. Annual Deductible. This is the annual amount of your medical expenses that you must pay before your health insurance company begins paying providers or reimbursing you for claims. Traditional healthcare plans have deductibles of up to $1,500 as well as co-pays for doctor visits and prescriptions. Highdeductible plans have deductibles from $1,000 to $10,000—but much lower premiums.
4. Out-of-Pocket Annual Maximum. Coinsurance is the amount, typically about 20 to 30 percent, that most insurance carriers expect you to pay on your annual medical expenses after you have met your deductible. Fortunately, most coinsurance clauses have an upper limit of about $10,000. Your maximum coinsurance obligation, plus your annual deductible is called your OOP max—referring to the maximum out-of-pocket annual expense you could incur under the policy. Some newer high-deductible plans, including many HSA plans, do not charge you coinsurance; they pay 100 percent of your medical
   expenses once you have met the deductible
5. Lifetime Maximum Coverage. This is the maximum amount of benefits that could be paid out over the life of the policy. Some states require individual/family policies to have a certain lifetime maximum—California requires all individual/family policies to have a lifetime maximum coverage of at least $5 million per person. You may not think today there is a big difference between a $1 million and a $5 million lifetime maximum, but you might think differently if you needed an organ transplant, which typically requires decades of expensive follow-up treatment.
6. Premium. This is the monthly amount you will pay for the policy and the options you have chosen. It is often paid quarterly, in advance, or monthly, with required automatic drafts from your checking account.