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, which are collectively called cost-sharing.

This article will explain why you still have to pay for health care when you have health insurance, and what you can expect in terms of cost-sharing.

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 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. This is because coinsurance is a percentage of the total bill, rather than a flat amount. (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.

How Much Do You Have To Pay?

The amount that you'll have to pay will depend on the type of medical care you need and the specifics of your health plan. For example, one family might pay $250 to deliver a new baby, while another might pay $5,000, with the difference simply due to the richness of the benefits provided by their health plans.

As long as your plan is regulated by the Affordable Care Act (ACA) and you follow all of your plan's rules for things like referrals, prior authorization, and step therapy, you'll be protected by your health plan’s out-of-pocket maximum for in-network care.

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 in-network healthcare expenses.

(Note that although most health plans follow the calendar year, some do not. So it's possible that your out-of-pocket maximum could reset mid-way through the calendar year. You'll want to understand how this works for your plan before you schedule any expensive non-emergency medical care.)

There's a list of preventive care that's free (ie, no deductible, copays, or coinsurance) as long as you have a non-grandfathered ACA-compliant health plan. If this is the only health care you receive during a given year, you won't have any out-of-pocket costs, as your health plan will cover all of it.

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.

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 don't have access to an employer's health plan, you may find that you're eligible for an Affordable Care Act subsidy to lower your monthly health insurance premiums. If so, you'll want to shop for your health plan in the exchange in your state, as that's the only place where subsidies are available. The ACA's subsidies are larger and more widely available through at least the end of 2022, due to the American Rescue Plan. 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.

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

• How to Get the Most From Your PPO
• How to Get the Most From Your HMO

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. (If you have your HSA-qualified health plan through your employer, the employer will likely help you open an HSA and allow you to make payroll deductions for the contributions. They may also make contributions on your behalf.) 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.

Summary

Health insurance is designed to protect people from very large medical bills. But for most services (with the exception of certain preventive care), the insured has to pay part of the bills until they reach the plan's annual out-of-pocket maximum.

These out-of-pocket costs can be in the form of copays, deductibles, and coinsurance, or any combination of those three. Once the out-of-pocket maximum is reached, the health plan will pay 100% of the cost of covered in-network health care for the rest of the plan year.

You can manage your out-of-pocket costs by carefully considering your health plan options during open enrollment (for your employer's coverage or a plan purchased in the health insurance exchange in your state), and by preparing for the potential of having to pay those costs. An FSA or HSA can help with this, if they're available to you.

A Word From Verywell

You'll almost certainly have to pay something if you need medical care, even if you have health insurance. And the amount you'll pay will vary depending on a lot of factors, including the specifics of the health plan you have, the medical providers you use, and the care you need.

You don't want to assume that your costs will be similar to someone else you know, as they might have a very different health plan or provider network. Your best bet is to carefully read your own plan, and pay close attention to your options during open enrollment to ensure that you're in the plan that makes the most sense for your needs.