Health insurance is a topic that sends many people running and screaming into the night! The nightmares of denials and unexpected costs can creep into the dreams of any person living with diabetes, often leading to more midnight “alarms” than their Dexcom sensor.
These fears are a natural reaction to the unknown. We don’t always know how insurance works. We don’t know if we’ve picked the right health plan. We don’t know if we can afford to live with this disease.
I don’t have all the answers, but I’ll try to pull back the curtain on health insurance plans and demystify the basics for you.
Let’s Start with This Question: How Do I Pick the Right Plan?
Is it the one with the lowest premium? The lowest deductible? The best network? The answer is – you have to do the math. You should pick the plan with the lowest total cost to you, not necessarily the lowest premium or the lowest deductible.
There are three components of Total Cost: Premiums + Deductible + Cost Sharing = Total Cost.
Premiums are the amounts you pay, often through payroll deductions, to get access to the health plan. It’s like club membership dues for the club you hope to never have to visit, but know that you will because you or a family member are living with diabetes. Premiums are absolutely known upfront and easily calculated. Also, note that if you are on an employer-based plan, your premiums may be coming out of your paycheck pretax so they will cost you 20-30% less than if you bought the same policy on the exchanges.
Deductibles are another component that is easily calculated. Whatever it is, that’s what you will pay. A person with diabetes typically meets their deductible 100% of the time regardless of its level, so it can usually be considered as a known cost in the calculation of total cost.
So two-thirds of the calculation is easy! Don’t you feel better?
The hardest part of the calculation is cost sharing, which is the portion you pay out of pocket outside of the deductible. Components of cost sharing are copays for office visits, copays for prescriptions, and coinsurance percentages for major medical services or specialty drugs. Copays are typically fixed amounts like $25 for an office visit or $35 for a prescription. These are fixed amounts and can be calculated relatively easily when you ask yourself how many times you go to the doctor, etc.
Coinsurance percentage is a bit harder to determine. First, you need to know the percentage of the cost that is your responsibility. This will be easy to find from the Summary of Benefits document that the plan is required to give you. Usually these are 80/20 or 70/30 with the lower number being your percentage of the cost.
Second, you need to figure out how much of your supplies, medications and services will be subject to your coinsurance percentage. This is the hard part, but you eat an elephant one bite at a time, so don’t give up now!
Let’s break this down to routine maintenance costs and unexpected (or perhaps planned) costs like surgeries. Start with routine maintenance costs because you know what supplies and drugs you need on a monthly basis.
The next question is, how much of these costs are in the deductible period? You can ignore those because you’ve already added the entire deductible to your total cost calculation. If it will take five months for the cost of these items to reach your deductible, then only seven months will be included in your cost share calculation. One other side note is to find out if any of your routine diabetes supplies and/or medications are treated outside of the deductible. For example, if your plan covers insulin pre-deductible, that means you go right to a copay. If that’s the case, you have a great plan!
Take a breath and list out the routine things you need – insulin, CGM sensors, CGM transmitters, pump infusion sets, pump cartridges, lab tests, etc. If you get those (excluding the etc.) you’ve probably captured the bulk of your cost. Calculate your percentage for the number of months that are post-deductible for those items, and you have your answer for the routine aspect of cost share.
You should also consider whether you have any planned surgeries coming up, or if you have other health issues that require other doctor visits or hospital costs. Those can add up, and may drive you to look for an 80/20 plan versus a 70/30 plan, even if the premiums are higher. Again, the all-in total cost is what you’re aiming for, not one component.
Now that you have your total cost calculated for your plan options, you can make an informed cost-based decision on which plan is right for you. Note that this doesn’t mean you’ll be a whiz at Sudoku now, but you should try one just to prove that health insurance isn’t the only mathematical source of frustration in your life!
It is important to note that there are other, non-cost-related factors when choosing a plan. For example, physician network and drug formulary – are your doctors and drugs covered? I will address those topics in the next installment of Demystifying Health Insurance! Stay tuned and stay healthy!
For more information on insurance and advocacy for people with diabetes, visit the Diabetes Leadership Council.
Demystifying Health Insurance Part 2: The Three Ds of Selecting a Plan
Demystifying Health Insurance, Part 3: Decoding Health Insurance Plans
Navigating Health Insurance in the U.S. (video)
Diabetes & Medicare (video)
New Medicare Program Offers $35 Max Copay for Insulin
Did Medicare Eat Their Part D Donut Hole?
What if you retire at age 62 and have to buy your own health insurance?
Congratulations on retiring early! You will likely need to go on to the exchanges for individual coverage for the next few years until you hit Medicare age if you aren’t covered under a spouse’s plan. The principles of Total Cost absolutely apply to evaluating an exchange plan.
Good luck and good health!
You might also want to consider the cost of your time. I choose to have a higher premium – but I don’t have to submit as many receipts to the FSA, and it is less work for me to have things covered at a higher rate.
Good point, Tina.