Raise your hand if you don’t know what a deductible is. If your hand’s in the air, you’re not alone — many millennials find the process of figuring out health insurance totally confusing and overwhelming. In fact, about 7.7. million young adults ages 19 to 34 went without health insurance last year. Yes, health insurance is a pain to figure out, and with the passing of healthcare reform in 2010 with the Affordable Care Act (ACA), there are even more changes to be aware of. To help you out, we’ve put together a guide to health insurance that will shed some light on the basics. So hunker down and start taking notes! Your health will thank you.
Know Your Insurance Terms
Whether you’re trying to navigate the government-run healthcare exchange or the healthcare plans offered by your employer, you’ll need to know the healthcare lingo to understand your options. Here’s the low down on some common terms you’ll encounter:
Premiums: Premiums are the ongoing payments you make to maintain your insurance plan. Since the same rate is typically billed to you monthly, it’s easy to budget for.
Co-Pays: A co-pay is how much your insurer requires you to pay your healthcare provider for a visit. Co-pays are often flat fees; for example, a co-pay may cost you $30 every time you want to get a check up with your primary care doctor. You often have to pay a co-pay for prescriptions, too.
The good news is that in an effort to encourage Americans to seek preventative care (which would lower the cost of medical expenses down the road), many private health insurers are now offering some preventative services without a co-pay, like screenings for diseases like diabetes, well-woman visits to the gynecologist, and some forms of birth control.
Deductibles: A deductible is the amount of money you have to pay out of your own pocket in a certain time frame —typically a year — before your insurance kicks in. So if you sign up for a plan with a $1,000 deductible, for example, you’ll have to pay $1,000 in medical costs (typically excluding co-pays) before your insurance will start to help cover your expenses. Plans with high deductibles often come with low premiums (a.k.a. low monthly payments), whereas low-deductible plans often come with high monthly premiums. If you have a chronic health condition that you know will rack up a lot of medical bills, it probably makes sense to opt for a high-premium, low-deductible plan. Many healthy millennials, however, opt for low-premium, high-deductible plans since they’re less concerned about running into unexpected health problems.
Coinsurance: Even if you’ve met your deductible, you’ll still be responsible for covering part of your medical costs — what you’re responsible for is called your coinsurance. For example, in an 80/20 coinsurance split, your insurer will pay 80 percent of your medical costs once you’ve met your deductible, and you’ll be responsible for paying the other 20 percent.
Go With the Group
If your employer offers a healthcare plan, it’s often a good idea to go with that plan rather than trying to sign up for a plan on your own. Why? Employers have more leverage to negotiate rates with insurance companies, since they can spread risks out over their whole group of employees, which means premiums and other healthcare costs are often lower on plans offered through an employer.
Self-Employed? You’ve Still Got Options
If you own your own business or are a freelancer, you’re not out of luck — you’ll just need a lot of patience to navigate your way around Healthcare.gov, the newish government-run healthcare exchange. On the site, you can shop for plans that fall into one of five categories:
Platinum: These plans are the most comprehensive, covering about 90 percent of healthcare costs. Expect high premiums though.
Gold: A step down from platinum, these plans have slightly lower premiums and cover about 80 percent of costs.
Silver: These plans cover about 70 percent of health costs, with generally lower premiums.
Bronze: These plans are lower-premium, high-deductible still, covering about 60 percent of costs.
Catastrophic plans: These plans can be considered extremely high-deductible (often above $6,000 for a single person), with extremely low monthly premiums in exchange. These plans are designed for healthy individuals and will really only cover emergencies, so they’re not offered to individuals over 30 years old (unless they apply for a “hardship exemption”). Individuals with catastrophic plans, however, are still eligible for many no-cost preventative care visits.
You don’t have to buy through the ACA Marketplace, but if you shop around directly from insurance companies, keep in mind you won’t qualify for any Affordable Care Act premium subsidies. These subsidies could lower the cost of your monthly premiums if you qualify, based on how much money you’re making. In 2016, single folks may qualify for a subsidy if they make less than $47,080 (note, though, that you won’t qualify for subsidies if you opt for a catastrophic plan).
While the deadline to get insurance that starts on Jan. 1st through the exchange has passed, open enrollment lasts until Jan. 31st — check out key dates here. And one more note: some states have their own health insurance exchanges, so check if you’re states one of them before you start navigating Healthcare.gov.
You’ll Have to Pay If You Don’t Have Insurance
When you’re under 35 you may feel invincible (hence the 7.7 million young adults without health insurance last year), so you may want to take a gamble and go without health insurance altogether. Keep in mind, though, that if you go that route you’ll have to pay up to the IRS. In 2016, the tax penalty for going without health insurance is 2.5 percent of your annual income or $695 — whichever amount is higher. You can avoid the fine if you qualify for an IRS exemption, but to play it safe (both tax-wise and health-wise!) it’s best to find a plan that works for you.
For millennials, it’s easier than ever to get health insurance, especially since the Affordable Care Act enacted a provision that allowed young adults to stay on their parents’ insurance until age 26. So if you’re still in college or grad school — or you’re ‘rents just have a really awesome insurance plan — you now have another option.
What piece of health insurance-related knowledge do you think every millennial should know? Share your insights with us in the comments below! And if you have more questions about healthcare changes brought about by the ACA, you can find more answers here.
