Would you like to really understand health insurance?
Read this section and you will!

Healthcare reform attempts to make insurance easier to understand for consumers. As such, the Affordable Care Act standardized and simplified health insurance by creating two regulations that insurance companies must meet.

  1. The Affordable Care Act standardized health plans be defining a set of ten essential benefits that all health plans must include. Thus any plan you buy must include benefits in these ten categories.
  1. The Affordable Care Act simplified health insurance by creating just four health plans named after four precious metals: Platinum, Gold, Silver and Bronze. When buying health insurance, your basic decision is to choose one of these four metal plans. A new term—Actuarial Value—will help you understand the essential differences between the metal plans.

Actuarial value (AV) represents the average percentage of medical bills that will be paid by a health plan during a calendar year, were that plan offered to a large population of people. In plain language it means, what the insurance plan will pay.

As mentioned, there are four levels or tiers of plans: Platinum, Gold, Silver and Bronze. In effect, the Affordable Care Act (ACA) commoditized health insurance into four precious metals, and defines them by their actuarial values (AV).

Plan Actuarial Value
(Insurance pays)		 You pay Premium
Platinum 90% 10% $$$$ (highest premium)
Gold 80% 20% $$$
Silver 70% 30% $$
Bronze 60% 40% $ (lowest premium)

Each metal plan must meet a specific AV, which becomes the common currency for comparing and evaluating plans. For example, a Silver plan must meet the Actuarial Value of 70%. This means the insurance company will pay on average 70% and you pay 30%. Every insurance company’s Silver plan must meet that same 70% criterion.

The Federal government created a computerized tool to determine the AV of a health plan. Since it is somewhat difficult to design a plan that is exactly 70%, insurance companies were allowed a range of plus or minus 2 percent. Thus a Silver plan with an AV of 70% can range from 68% to 72%.

We recommend you learn to use new terms to describe your health plan.  The easy way is to simply name the metal and the actuarial value.  For example: “I have a Bronze 60 health plan.” You might also have a Silver 70, Gold 80 or Platinum 90 plan .

When you say “Bronze 60,” you know the plan has the characteristics of a Bronze plan and pays on average around 60% of healthcare costs. You also know that every insurance company’s Bronze plan has to meet these same requirements.  In a following section, you will learn the characteristics of each metal plan.

If you knew you would never spend more than $500/year on health expenses over the next 10 years, would you buy health insurance that costs $4-500/month or $6,000 per year? Of course not!

But… if you knew that you might have one large hospital bill of $100,000, but didn’t know if it would occur in year 1, 5, or 7, would you buy insurance? Yes, of course!

The main reason you buy health insurance is to protect against large, unexpected medical bills.

Important understanding
Whether you buy a low cost “bronze” plan, moderately priced “silver,” or an expensive “gold” plan, each plan will have an out-of-pocket maximum around $6,000. Thus the bronze plan is the most cost effective way to protect from large, unexpected medical bills.

Recommendation
Step 1: I recommend that everyone think of the bronze plan as the “default plan.” Specifically, the Bronze HSA-qualified health plan.

Step 2: carefully consider your expenses over the last few years to determine whether it makes sense to pay “additional premiums” to get a lower deductible or low copays for doctor visits and prescription drugs.

  • If “yes” choose the one of the more expensive plans
  • If “no” stick with the default bronze plan.

To understand health insurance you must first understand the three basic elements on every insurance policy: deductible, cost-sharing (or coinsurance) and out-of-pocket maximum.

  • The Deductible: The amount the plan member pays before the insurance company pays anything. If you have a larger, unexpected medical bill, and your plan has a $2,000 deductible, you must pay the first $2,000 before the health plan will pay any of the bills. Important Note
  • Cost-sharing or Coinsurance: After meeting the deductible, the plan member and the insurance company share the remaining expenses, with the insurance company paying a larger portion (e.g., 80%) and the plan member paying a smaller portion (e.g., 20%). Cost sharing typically applies to large expenses such as hospital, inpatient and outpatient surgeries and more expensive imaging tests.
  • The Out-Of-Pocket Maximum (OOP Max): The most a plan member will pay in any calendar year. After an individual reaches his/her OOP Max, the insurance company will pay all remaining expenses.

In the following table, the plan details are based upon “model” plans; each company’s health insurance plans may have slight variations compared to these model plans. But all plans from all companies must meet the requirements for actuarial value.

THE METAL PLANS
PLATINUM GOLD SILVER BRONZE
Actuarial Value 90% 80% 70% 60%
Premium $$$$ $$$ $$ $
Deductible $0 $0 $2,000 $5,000
Coinsurance
Cost-sharing		 10% 20% 20% 30%
Max OOP IND
Family (2+)		 $4,000
$8,000		 $6,350
$12,700		 $6,350
$12,700		 $6,350
$12,700
Click for Example

One of the ten essential benefits is that preventive exams are covered at no cost to the plan member when services are provided by a doctor in the insurance company network. In addition to routine physical exam and laboratory tests, more expensive tests such as a colonoscopy are covered at no cost at designated age intervals.

THE METAL PLANS
PLATINUM GOLD SILVER BRONZE
Preventive $0 $0 $0 $0

To enhance the value of insurance to the plan member, insurance companies offer “copays” that are fixed dollar amounts for routine medical expenses such as office visits and prescription drugs. Instead of meeting a deductible, the plan member will pay the copay at time of service.

Copays only apply to doctors who are in the insurance company network. The chart below illustrates the copays for three kinds of doctor visits: General Practice or Primary Care, Specialist, or Urgent Care. There are no copays when a plan member sees an out-of-network provider.

THE METAL PLANS
PLATINUM GOLD SILVER BRONZE
General practice $20 $30 $45 *$60
Specialist $40 $50 $65 NA
Urgent Care $40 $60 $90 NA

Note: Three bronze copays apply only to general or family practice physician

With the new metal plans, there are often copays for routine laboratory exams, x-rays and emergency room visits to make these services more affordable.

THE METAL PLANS
PLATINUM GOLD SILVER BRONZE
Imaging (e.g., MRI) 10% 20% 30% 30%
Lab $20 $30 $45 30%>Ded
X-ray $40 $50 $65 30%>Ded
Emergency $150 $250 $250 $300

Note: Percentage values apply after deductible; dollar values bypass the deductible

The major purpose of health insurance is to pay large, unexpected medical bills such as hospital, surgery, and expensive treatments. The percentages in the chart below apply after you meet the plan deductible; you will pay this percentage up to the out-of-pocket maximum, and then the insurance plan will pay the remaining costs.

THE METAL PLANS
PLATINUM GOLD SILVER BRONZE
Hospital 10% 20% 20% 30%
Surgery 10% 20% 20% 30%

Each insurance company develops a list of drugs called a formulary that contains medications that are clinically- and cost-effective. There are four classifications of prescription drugs. Each company’s formulary is different.

  • Generic drugs (tier 1) are the most affordable medications and have the lowest copays.
  • Preferred brand drugs (or tier 2 drugs) are older, time-tested medications that are clinically effective but have lower costs than the newer brand name drugs.
  • Non-preferred brand drugs (or tier 3 drugs) are often newer, more expensive brand medications that have higher copay.
  • Specialty drugs (or tier 4 medications) include injectable drugs and the newest, most expensive medications.

Note: On some plans there is a brand name deductible, where you pay for drugs up to the deductible, and then the copays begin. There are no drug deductibles on platinum and gold plans.

THE METAL PLANS
PLATINUM GOLD SILVER BRONZE
Generic RX $5 $19 $19 $19
Preferred brand $15 $50 $50 $50
Non-preferred $25 $70 $70 $75
Specialty 10% 20% 20% 30%
*Brand deduct $0 $0 $250 $5000

*The $5000 deductible is a combined deductible for medical and prescriptions.