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Health Care Reform:

Health Insurance & Affordable Care Act

Understanding Health Insurance - Choosing a Plan

When you are choosing a health insurance plan, carefully consider the plan's rules and policies. Find out the cost of the plan (premium), what medical services are covered, how the payments work, and how much choice you will have when choosing providers and hospitals. Ask for a summary of the plan's benefits.

Read the plan's brochure closely before you sign up. Ask questions about parts you don't understand. It may be helpful to know these terms:

  • Coinsurance: The amount you have to pay for a medical expense after you meet your deductible
  • Co-pay: A set fee you pay each time you receive certain types of medical care
  • Deductible: A set amount that you will pay for your health care each year before your insurer helps you pay the costs. Some insurers, though, may help you pay for certain services—such as a wellness checkup—whether you've reached your deductible or not.
  • Denial of claim: When an insurance plan refuses to pay for a certain health care service
  • Exclusions, limitations, or noncovered: Medical services that aren't covered by the insurance plan
  • Flexible spending account: An account where you can use pre-tax dollars to pay for specific services not covered by your insurance plan, such as co-pays and dependent care
  • Formulary: A list of medicines that your insurance plan will cover or help you pay for
  • Health savings account: An account a person or employer sets up to save money for health care costs
  • Out-of-network: Health care services received outside of an insurance plan's network of providers. Services received out-of-network often cost more than services received in-network.
  • Pre-existing condition: A health problem you already have when you apply for health insurance
  • Premium: The amount you pay to have a health insurance plan

It's a good idea to contact your doctor's office to find out which health plans are accepted and how the payments work.

Coverage for medicines

Find out how your insurance covers medicine costs. In general, you'll pay less for generic medicines than for brand-name medicines. Some insurance companies require prior authorization from your doctor before they'll help you pay for a medicine. For instance, this may be the case if you'd prefer to take a brand-name medicine over a generic one in the same class of drugs. With some plans, you may have to pay more for medicines that aren't on the plan's list of preferred medicines (formulary). Some insurers cover medicines that are bought only at certain pharmacies.

A formulary may put drugs into three groups, or "tiers," based on how much your health plan will pay and how much you will have to pay.

  • Group 1: Generic drugs. These are usually drugs that have been in use for a long time, have proven benefits, and cost less to make and sell. You pay the least for drugs in this group.
  • Group 2: Brand-name drugs that are on the formulary. Your health plan may have agreements with some drug companies to offer their brand-name drugs at a lower cost. You still pay more for the "formulary" brand-name drug than for the generic, but it costs less than brand-name drugs that aren't on the formulary.
  • Group 3: Brand-name drugs that are not on the formulary. These drugs cost more because your health plan doesn't have an agreement with the drug company to reduce the price. When the health plan pays more, so do you.

If you have a choice between plans, check what your co-pay for prescription drugs will be, the maximum amount the plan will pay in a year, and other details.

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