Healthcare in the United States is a scam. A metastasizing mass of squeezing, wrenching, covetous middlemen bent on extracting pennies from the poorest of the poor. If you’re unfortunate enough to have needed medical attention in this country, you likely have a firsthand understanding of how dehumanizing this process is.
An annual study conducted by the Commonwealth Fund compares healthcare systems across the 11 wealthiest countries, globally. Every year since 2004, we’ve ranked last overall. That’s last in equity, last in access to care, last in administrative efficiency, and last in overall quality of health care outcomes.
We are also an outlier in overall cost. The United States Government spends roughly 17% of our GPD on subsidizing healthcare – more per person than any other nation on the planet. That’s high, but it’s not even the whole story. Because we have a private healthcare market, ordinary citizens pay an additional 12% of the GDP, out-of-pocket for healthcare costs. But for most other wealthy countries, healthcare spending amounts to only 8-11% of the GDP, and their citizens pay almost nothing out of pocket. We’re a joke, by comparison.
As such, our health insurance industry was designed to confuse, bore, and obfuscate. The less we understand, the easier it is to take advantage of us. The less people know about what they’re entitled to, the more money the insurance company can save. So today, I’d like to break down some of the most fundamental topics in health insurance. To explain, as plainly as possible, the simplest concepts a person must understand before making choices about their healthcare.
We’ll start by defining items in one subset of costs: all the things you have to pay for, on any insurance plan in the United States.
What’s a Premium?
Your premium is the baseline fee paid in exchange for insurance coverage. It can be billed weekly, monthly, or however your insurance company or employer decides. In most cases, it’s monthly. In any case – it’s the most important payment. If you fail to make timely premium payments, your insurer can terminate your health coverage without warning. Although, for better or worse, many people’s employers automatically pay the premium, then deduct the costs from payroll.
What’s a Deductible?
A deductible is a set amount that you’ll pay out-of-pocket for medical services each year before your insurance company begins to help. There is an inverse relationship between deductible and premium cost – meaning that your premium goes up as your deductible goes down. You pay more monthly for less cost-responsibility, yearly.
If you’re a young, healthy person, you should be looking for a higher deductible plan. For you, health insurance is more of a protection from catastrophic accidents than a way to mitigate expensive yearly costs. If you’re older or have a chronic condition requiring a specialist’s attention, then you should be looking to minimize your deductible. In other words: don’t shop for a lower deductible unless you have good reason to expect lots of medical expenses this year.
What’s Co-insurance?
Co-insurance is the percentage of medical costs you’ll still pay after meeting the deductible. It’s usually a minority percentage – 20-40% -, but still a hindrance and often an inevitability. Very few plans skip past co-insurance, and the ones that do are often copay-only. In that light, this number is a great way to determine the overall quality of a plan.
Generally: the higher the co-insurance, the worse the plan.
What’s a Co-pay?
A co-pay is a small, fixed amount you’ll pay for a particular service. You usually only pay co-pays for services not subject to the deductible – like visits to your primary care doctor or behavioral health services (therapy). It’s a negligible percentage of one’s total healthcare costs.
What’s my Out of Pocket Maximum?
Your Out-of-Pocket Maximum is the most you’ll pay for medical expenses in the calendar year. You pay 100% of all medical costs up to the amount of your deductible. Then, between the amount of your deductible and the Out-of-Pocket maximum, you’ll continue to pay your co-insurance percent. And only after you’ve met your Out-of-Pocket maximum will insurance pay 100% of medical costs for the remainder of the year.
