Many people will soon be picking their health insurance plans for 2024, as November is a common month for workplace open enrollment, and the public health insurance marketplace opens Nov. 1.
But, choosing a plan can be tricky. Health plans have many moving parts, such as premiums and deductibles. And each has their own set of financial implications for buyers.
Here are four key terms to know as open enrollment begins:
1. Premiums
The premium is the sum you pay an insurer each month to participate in a health plan. It’s the most transparent and easy-to-understand cost component of a health plan — the equivalent of a sticker price on a vehicle.
In 2023, the average premium paid by an individual worker was $1,401 a year — or about $117 a month — according to a survey on employer-sponsored health coverage from the Kaiser Family Foundation, a nonprofit. Families paid $6,575 a year, or $548 a month, on average.
Your monthly payment may be higher or lower depending on the type of plan you choose, the size of your employer, your geography, and other factors.
2. Co-Pay
Many workers also owe a copayment — a set, flat dollar fee — when they visit a doctor or pick up a prescription. A “co-pay” is a form of cost-sharing with health insurers.
The average patient pays $26 for each visit to a primary-care doctor and $44 to visit a specialty care physician, according to KFF.
3. Co-Insurance
Patients may owe additional cost-sharing, such as co-insurance, a percentage of health costs that the consumer shares with the insurer. This cost-sharing generally kicks in after you’ve paid your annual deductible.
The average co-insurance rate for consumers is 19% for primary care and 20% for specialty care, according to the same KFF data. The insurer would pay the other 81% and 80% of the bill, respectively.
Co-pays and co-insurance may vary by service, with separate classifications for office visits, hospitalizations or prescription drugs. Rates and coverage may also differ for in-network and out-of-network providers.
4. Deductible
Deductibles are another common form of cost-sharing.
This is the annual sum a consumer must pay out of pocket before the health insurer starts to pay for services.
90% of workers with single coverage have a deductible in 2023, according to KFF. Their average general annual deductible is $1,735.
The deductible meshes with other forms of cost-sharing. And, health plans may have more than one deductible — perhaps one for general medical care and another for pharmacy benefits, for example.
The average deductible can vary widely by plan type: $1,281 in a preferred provider organization (PPO) plan; $1,200 in a health maintenance organization (HMO) plan; $1,783 in a point of service (POS) plan; and $2,611 in a high-deductible health plan, according to KFF data on single coverage.
Related: How to Maximize Your Health Savings Account (HSA)
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Bautis Financial LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
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