Understanding Arizona health insurance plan options

 

Introduction to health insurance in Arizona

WHY BUY HEALTH INSURANCE?

A common complaint among consumers is this: “I’ve paid for Arizona health insurance every month for years, and the deductible is so high that I’ve never ever gotten any use out of it. I’m perfectly healthy and never go to the doctor. Why should I pay for something I’m never going to use?”

Ah, but What If?  What if you’re in a car wreck and in the hospital for weeks or even months? What if you’re diagnosed with cancer and have to start chemotherapy and radiation treatment within days of your diagnosis? What if you have a heart attack, or need by-pass surgery?

These bad things do happen to good people. And if you don’t have insurance, you better have plenty of money—and we’re talking about six figures and up—to pay your bills. Otherwise, be prepared to lose your savings, your house and just about anything else of value that will go toward paying off your medical bills.

Arizona health insurance is a necessity to take care of those “What if”s.” In the long run, it is less expensive than dealing with a catastrophic medical event (not to mention the fact that you may be very limited in your hospital and doctor selection without insurance). You may never need it, but if you do, you’ll be thankful that it is in place.

Tremendous advances are being made all the time in medical research and treatment.  Patients and doctors are requesting more tests, new procedures, even second opinions. All this comes at an increase in cost of treatment, and those costs are being passed along eventually  to the consumer. If you don’t have health insurance, you’ll be facing those increases by yourself.

HOW INSURANCE WORKS

Before you make your decision on which plan or Arizona health insurance carrier you’re going to go with, a decision that can have significant consequences if you ever have a major medical event , you need to know one or two things about health insurance.

Here’s  a quick primer on the subject, and we’ll be glad to answer any questions you may have afterwards.

Health insurance works basically like any other form of insurance: a large number of people (the insured) pay into a pot, and the carrier uses this money in the pot to pay out hopefully a much smaller amount of money in claims. 

Costs are theoretically kept under control because the carriers have the plans set up so a portion of the up front costs are covered by the insured, who typically play a portion of a medical bill before the carrier pays anything.

This is called the deductible, and it is a main cost (other than the monthly premiums) that the insured has to deal with.  The amount of the deductible can vary widely, from a few hundred dollars up to $10,000. The higher the deductible, the lower the monthly premium. When shopping for a health insurance plan, you want to try to match the deductible you could afford with the lowest possible premium you feel comfortable with each month.

We  recommend that you choose the highest deductible you could afford to meet if you had to do it tomorrow, and match that with the lowest monthly premium payment that you can afford. Remember that the higher the deductible, the lower the monthly premium.

However, this is not the only cost. Some people believe that once they’ve paid the deductible, they’re home free. That’s not true for most plans. Something called the co-pay raises its ugly little head. This is a percentage that you must pay on the remainder of the bill, until you reach a preset maximum amount (the out-of-pocket maximum). After which, the insurance pays 100 percent. You will always pay the smaller amount of the co-pay, while  the insurance company pays the larger amount (so if 80/20 is the co-pay, it means that you will 20 percent of the remainder of the bill until you reach the maximum, and the insurance will pay 80 percent).

Also keep in mind that the insurance doesn’t pay everything. Some medical procedures fall under the umbrella of “exclusions and limitations” and won’t be covered.   Cosmetic surgery would be an example, or aromatherapy. These typically are not considered medical necessities by the insurance companies.

TYPES OF PLANS

It is important to be familiar with the different types of insurance. There are basically three types of family/individual plans.

Health Maintenance Organization (HMO)—This type of plan was popular in the 1980s when it was seen as a way to contain health costs. If you are a member of a HMO you have to go through a general practitioner before you see a specialist. The thinking was that if the GP can fix you, the carrier won’t have to spend for the higher cost of a specialist. If the GP feels you need greater expertise relating to a condition than he can provide, then he refers you to a specialist.

For whatever reason, HMOs have basically dropped off the map, at least in Arizona, and tend to be surprisingly expensive. Most consumers would rather have more choice in choosing their medical providers, whether it be doctor or hospital, than is permitted through an HMO. 

Preferred Provider Organization (PPO) This is the standard plan for individual and family coverage. The “organization” refers to the network of doctors and hospitals that the carrier has contracted with. In exchange for bringing a lot of bodies through the provider’s door (you, the patient), the insurance company is able to negotiate lower, more attractive rates. There are always a lot more doctors and hospitals  to choose from in a PPO compared to the HMO. Deductibles can range from a very low amount of a couple of hundred dollars, all the way up to $10K. There is also variance in the co-pay, from 20%, to 30% and even 40%, depending on the plan (A higher co-pay will help push down the monthly premiums, since the carrier knows you are going to have to pay more of the bill with a higher co-pay).  If you go to a doctor outside the network, however, you will pay more, because the “best rates” have not been negotiated.

Health Savings Account. This is a insurance plan attached to a savings account. You can put money into the account every calendar year (a maximum amount of $3100 for an individual, and $6250   for a family, for calendar year 2012) and while that money is in the account, it is tax deferred, tax deductible and generates interest. You can also use it to pay medical, dental and vision costs (but not the monthly premiums) and it will not count toward taxable income. Usually the insurance company has a bank you can use to set up an HSA, but most banks now offer this service, so check with your bank to see if it has an HSA plan, and shop around with other banks. There can be a significant  difference in service charges in to maintain an HAS from one bank to another.

A disadvantage in an HSA in some people’s minds is the deductibles are relatively high and you must meet the deductible before the plan pays much of anything. We don’t recommend these plans for people with young children because they lack office visit co-pays (all those trips to the doctors for sore throats bouts with the flu) and don’t give much of a break on prescriptions. either.

Indemnity plans. There is no reason to get an indemnity plan if you qualify for a PPO or HSA. If you don’t, you may want to consider one with the idea that it is better than no coverage of all. An indemnity plan pays a fixed, predetermined amount  for medical procedures and costs, i.e., a flat daily rate for hospitalization no matter what the hospital charges. There is sometimes a deductible and co-pay involved as well. Think of them as a type of plan that will pay part, but not all, of your medical bill.

 

PRESCRIPTION DRUGS

One of the most expensive part of medical treatment is the cost of prescription drugs, although most consumers don’t recognize it as such. New medications are being introduced all the time, and someone must cover the cost of research and marketing (pharmaceutical companies pay big bucks now to market and advertise their products, and these costs are passed on to the consumer.

Generic drugs are cost effective, but there are plenty of medication that is branded—usually these are the newest drugs and the ones for which the pharmaceutical companies have some kind of patent protection for. These tend to be much more expensive than generic. (If you’re the only game in town, you can charge whatever the market will bear).

The plans with richer benefits have a tiered system where drugs are categorized according to a fixed cost. This cost is the co-pay. Typically it can run $15 (for generic), $40, or $60 per prescription, depending on where the prescription falls in the tier, although there is variations according to carriers.

Plans with leaner benefits may offer a $15 generic and an “up to” set price for everything else. The least expensive plans have only a discount card which gives you some advantage compared to the Joe Shmoe who walks in off the street.

One thing that the carriers in Arizona are not making very visible at this time, but which is fairly common, is a separate deductible for prescription drugs (excluding generic). This can range from $200 to $1000 depending on the carrier or the plan. We’ll be glad to help you determine the amount if you have any questions.

After touching on the highlights, we hope you have enough information to begin looking for the right plan for you. However, we expect other questions to come up, so don’t hesitate to get back to us. Our goal is to help you find the right plan at the right price.      

 

 
 

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