P-to the-D-to the-O: Three Important Factors To Know Before You Choose Your Health Plan

I can’t think of a bigger hot button topic right now than the Affordable Care Act (aka Obamacare). As if we needed something else in this country to divide people’s opinions even more. Yes, I’m one of those people who don’t like to talk about politics because no one can play nice anymore. Somehow we’ve all lost the art of being polite and would much rather cram our opinion down the throats of others. I digress.

There is little grey area with the ACA, as it seems like people either love or hate this new health plan. Let’s take away the politics right now and look at what I feel are the three most important pieces of each health plan that you should understand with no exceptions.

I call this the P-to the-D-to the-O: premiums, deductibles, and out of pocket max.

To The “P”:
The “P,” or premium, is seemingly all that people are talking about these days. Obviously, what you pay monthly makes a huge impact on your personal financial status. It has always been that the more you pay, the more you get. That same theory still applies to the ACA plans for the most part. We could spend forever talking about the “P”, but here is some key information you need to know.

In my opinion, the only reason in 2014 and beyond that you would opt for an ACA Healthcare Exchange plan would be due to the government subsidies. If you don’t qualify for a subsidy, then consider a traditional plan with a health insurer which will likely offer you broader benefits. If you opt for the ACA exchange pay attention to the income phase-out levels (this is the point at which you make more money than allowed for a subsidy).

o Individual- $45,960
o Married couple with no kids- $62,000
o Married couple with one child- $78,000
o Married couple with two or more children- $94,200

To The “D”:
The “D,” or deductible, is less commonly understood. The deductible simply is the amount you have to spend each year until your insurance company will kick in and start to pay. When I was getting my CFP Certification, we learned a cool way to figure out how your deductible works. Here is the short version — it’s called a T-Chart.

Make a T on a piece of paper. On the left side list a service, say doctor’s visit, and on the right list your deductible. You keep deducting the left from the right side throughout the year until the right side equals $0. At that time, your health insurance will begin to cover expenses, per the plan design, going forward for the rest of the year. Depending on your carrier, the amount covered may then be a set percent amount for in-network and a lower percent for out-of-network care. You have to come up with the cash to pay everything on the right side of the T chart until you reach your deductible. Does that make sense? It gets more confusing when there are multiple members of the family, but for the most part, that should help you visualize how deductible works.

Let’s take Californiia’s “Covered California” exchange for an example. California has the mandatory four different plans: Bronze, the least expensive, Silver, Gold and Platinum. The Bronze plan has a $5000 deductible, Silver $2000, and Gold and Platinum have no deductible but of course you pay more each month for those in terms of “P.”

Listen, the “D” is very important, and it’s important to know what you’ve got so you can plan financially for it.

To The “O”:
STOP! Listen, listen, and listen! I need your attention. This is the least talked about part of any health plan, and can be the single most important piece that will either make or break you financially. The “O” stands for out-of-pocket-max and it literally means just that- the most amount of money out of your own pocket that you will have to spend each year.

Why does this matter? Well, let’s pretend you were lucky enough to be on a group health plan through your employer. Most plans have a low deductible and low out of pocket max. Therefore, you won’t have to reach deep in your pockets to pay for your health care. BUT, if you have a plan that is not with an employer, or one with the ACA exchange, then you might need to dig a bit deeper in those pockets of yours; in fact, start searching the crevices of your couch too while you are at it.

There is no “have your cake and eat it too” when it comes to the “O” for ACA exchange plans in my opinion. Federally, it breaks down in this manner:

– Bronze, Silver, and Gold- $6,350 individual, $12,700 family
– Platinum $4,000 individual, $8000 family

Stop the presses! Wait, you mean I have to come up possibly with $6,350 if I am an individual should I have a major health need? Yep, that is correct! The good news is that once you hit this max, then your insurance will cover you at 100% for the rest of the year. Can you see now why the “o” is so important? If you need to be hospitalized, have a baby, have a major surgery, etc. you will most likely hit this max. If you haven’t planned for this, you better hope a money tree appears suddenly in your front yard.

I’m speaking to my peers on this now. It’s time that we really become educated financially about what we have and what we don’t have. And as a financial expert, I feel it’s my duty to help educate you, if nothing else, from my perspective about the issues that I think no one is talking about.

Here’s to hoping I’ve helped you make some Dollars & Sense out of this all.