Paying for Health Care Even With Insurance

If you’re new to health insurance, you may be surprised that you still have to pay for health care. Isn’t your health plan supposed to pay your medical bills now?

Well, yes and no. Your health insurance is supposed to pay part of the cost of your health care, depending on the services that you need during the year. But you’ll still end up paying deductibles, copayments, and coinsurance.

woman looking at credit card bills and credit health insurance

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Why You Still Have to Pay Medical Bills When You Have Health Insurance

Health insurers want you to have some "skin in the game" so you won’t get expensive health care frivolously. If you have to pay something, even a small copayment each time you see the doctor or fill a prescription, you’re more likely to use good judgment about whether or not you really need to see the doctor or fill that prescription. You won’t run to the doctor for every little thing or fill prescriptions for medicine you might not really need.

(On the other hand, there are concerns that out-of-pocket costs at the doctor's office, hospital, or pharmacy can make it difficult for people to access even very necessary care, resulting in poorer long-term health outcomes. There is considerable debate among health care reform advocates in terms of whether we should transition to a system that does not require out-of-pocket costs every time people receive medical care.)

Even more effective than copays, coinsurance requiring you to pay a percentage of the bill is designed to motivate you to make sure the health care you’re getting is not only necessary but is also the most economical treatment choice that will work for you (although there is debate over how easily consumers can "comparison shop" for their health care needs, and how feasible it is to ascertain the price ahead of time).

For example, when my friend found out that the prescription for acne medicine prescribed for her teenage son would cost $1,000 (after the health plan's negotiated discount), she decided that was excessive and there had to be a more reasonable treatment option. With her 30% coinsurance, she would have paid about $300 for each prescription fill. The health insurance would have paid $700.

Instead of racking up lots of medical bills, she investigated less expensive treatment options. She spoke with the dermatologist and found that an older medicine that cost a lot less was almost as effective. Since she had to pay a coinsurance percentage for the medicine, by choosing a less expensive drug, she could save a lot of money.

What’s Health Insurance Really For, Anyway?

Health insurance isn’t designed to pay every little bit of your healthcare expenses. It’s designed to pay a lot when you have catastrophic expenses and to help you out a bit when you have more moderate expenses.

Although copays, coinsurance, and especially deductibles can be quite expensive, you’re protected by your health plan’s out-of-pocket maximum. When the deductibles, copays, and coinsurance you’ve paid this year add up to your plan’s out-of-pocket maximum, your health plan begins picking up 100% of your covered healthcare expenses, as long as you stay in-network and follow all of your plan's rules for things like referrals, prior authorization, and step therapy.

This means you may have to pay a few thousand dollars each year towards your healthcare expenses even though you have health insurance. But, it also means that when you need a $400,000 bone marrow transplant to save your life, your health insurance pays for all but a few thousand dollars of it.

The problem is that health care costs so much; it’s easy to overwhelm the average family budget with even moderate healthcare expenses. While there’s no perfect solution for this dilemma, there are some things that will help over time.

If you’re eligible for an Affordable Care Act subsidy to lower your monthly health insurance premiums, apply for it (this means you'll need to shop for your health plan in the exchange in your state). There are even subsidies to help lower the cost of your deductible, copays, and coinsurance, as long as you enroll in a Silver-level plan through your state's exchange.

The ACA's subsidies are larger and more widely available in 2021 due to the American Rescue Plan, and there's a COVID-related enrollment window that continues through August 15, 2021, in most states. This gives people another chance to sign up for coverage or make a plan change to best take advantage of the newly enhanced premium subsidies.

Make sure you understand your health plan and you’re getting the absolute best bang for your buck. Learn how in:

And keep in mind that while it's possible to purchase coverage with very low out-of-pocket costs, you'll typically pay a lot more in monthly premiums as a result. Be sure to crunch the numbers and see exactly how much more you'll be paying in trade for a lower out-of-pocket exposure. It might not be worth it, especially if you're relatively healthy and don't anticipate significant medical costs.

And on the other end of the spectrum, if you anticipate significant medical costs and you know that you're going to need to meet your health plan's out-of-pocket limit no matter what plan you choose, you might find that you come out ahead with a higher-deductible plan that has a lower premium. This might seem counterintuitive (people often assume that they need the highest-cost plan if they've got significant medical needs), but you might find that your total costs, including premiums, are lower with a lower-cost plan, despite the higher deductible.

FSAs, HSAs, and Supplemental Coverage

If your workplace offers a flexible spending account, consider participating in it. The FSA will allow you to pay your deductible, copays, and coinsurance with pre-tax money. Additionally, the FSA is funded by small amounts taken from each paycheck. It's much easier to pay a $2,000 deductible by having $77 taken from your paycheck every two weeks than it is to magically produce $2,000 from your checking account when you're sick.

If you're eligible for a health savings account because you're enrolled in an HSA-qualified high-deductible health plan, it's in your best interest to open an HSA and make regular contributions to it. The HSA will smooth out your healthcare budget like an FSA does, but it has several advantages over an FSA. Learn more in "5 Ways an HSA Is Better Than FSA."

In some circumstances, supplemental insurance might be beneficial. But it can also be a waste of money in some cases. Do your homework, read all the fine print, understand what's covered, and calculate your expected costs and savings before enrolling in any supplemental coverage.

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  1. Norris, Louise. Five Ways the American Rescue Plan Might Slash Your Health Insurance Costs. March 18, 2021.